Sept 23 (Reuters) - The city of Miami and the U.S. Securities and Exchange Commission reached a tentative settlement after a jury found the city liable for securities fraud in the sale of over $150 million in municipal debt in 2009.
Lawyers for the SEC and the city said in a Thursday court filing that the proposed settlement would allow both sides to avoid further litigation and resolve “all remaining issues” in the agency’s case against Miami.
The SEC’s 2013 lawsuit alleged that the city and Boudreaux failed to tell credit rating agencies and investors they had moved money between municipal accounts to keep Miami’s general fund above a city-mandated $100 million level. Some of the money had already been pledged to capital projects or was needed for ongoing expenses.
The terms of the settlement were not disclosed.
After the Sept 14 jury verdict, the SEC said it planned to ask the court for injunctive relief and monetary penalties within two weeks. It was unclear from Thursday’s court filing whether the city will be paying monetary penalties or in what amount.
Amie Berlin, senior trial counsel for the SEC, declined comment on Friday. Lawyers for the city could not immediately be reached for comment.
The Miami City Commission must still approve the settlement and will vote on it on Oct 13, the court filing said. The five commissioners of the SEC must also authorize it.
The settlement does not cover the SEC’s claims against former Miami budget director Michael Boudreaux, who the jury also found liable of misleading investors about the city’s financial health.
A nine-person jury found Miami and Boudreaux liable for engaging in a “shell game” by shuffling money among accounts to conceal the city’s deteriorating financial condition from investors and help it sell debt.
Miami and Boudreaux had denied wrongdoing, saying the fund transfers were approved by auditors and publicly disclosed.
The courtroom win came in the SEC’s first federal jury trial against a municipality or its officers. The agency has been stepping up scrutiny of the $3.7 trillion municipal bond market following a wave of defaults during the global financial crisis.
The case is Securities and Exchange Commission v. City of Miami et al, U.S. District Court, Southern District of Florida, No 13-cv-22600. (Reporting by Dena Aubin; Editing by Anthony Lin and Daniel Bases)