Securities Regulation Daily 3 of 4 town officials play ball with SEC to settle administrative charges
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Friday, June 8, 2018

3 of 4 town officials play ball with SEC to settle administrative charges

By Brad Rosen, J.D.

Three town officials from the town of Ramapo, New York, settled administrative charges brought by the SEC in connection with the roles each played in hiding the municipality’s financial troubles from bond investors involving a project to build a baseball stadium with a $60 million price tag. In a proceeding brought in the U.S. District Court for the Southern District of New York, the SEC obtained lifetime bars prohibiting town officials Nathan ObermanMichael Klein, and Nachman Aaron Troodler from participating in municipal bond offerings. The applicable court orders also permanently enjoin each of the settling respondents from violating Securities Act Section 17(a) and Exchange Act Section 10(b) and Rule 10b-5 thereunder.

According to the SEC’s release, the final judgments also required Oberman to pay $10,000 and Klein to pay $25,000 in civil penalties, respectively. In addition, both were required to resign from their employment from Ramapo. Oberman is prohibited from being employed by the municipality for five years and Klein is prohibited from such employment for seven years. Both consented to their respective final judgments without admitting or denying the allegations in the SEC's complaint.

SEC complaint. The SEC brought its complaint in April 2016 alleging that Ramapo officials resorted to fraud to hide the strain in the town’s finances caused by the approximately $60 million cost to build a baseball stadium, as well as the town’s declining sales and property tax revenues.

The complaint alleged that municipal officials cooked the books of the town’s primary operating fund to falsely depict positive balances between $1.4 million and $4.2 million during a six-year period when the town had actually accumulated balance deficits as high as nearly $14 million. As the stadium bonds issued by the Ramapo Local Development Corp. (RLDC) were guaranteed by the town, the complaint also alleged certain officials masked an operating revenue shortfall at the RLDC and that the town would likely need to subsidize those bond payments and further deplete its general fund, unbeknownst to the bond investors.

Parallel criminal proceeding. Aaron Troodler, the former RLDC executive director and assistant town attorney, also previously pleaded guilty to charges in the parallel criminal case brought by the U.S. Attorney's Office for the Southern District of New York. That case is believed to be the first conviction for federal securities fraud in connection with municipal bond issuances.

Ongoing litigation. Criminal proceedings as well as the SEC's action against Christopher St. Lawrence continue. St. Lawrence, who served as RLDC’s president and Ramapo town supervisor, is considered to be the key player in the fraud and the mastermind of the scheme to artificially inflate the balance of the general fund in financial statements for fiscal years 2009 through 2014. The SEC is seeking injunctions, financial penalties, and an order prohibiting St. Lawrence from participating in future municipal bond offerings.

Attorneys: Alexander Mircea Vasilescu for the SEC. Gregory Robert Morvillo (Morvillo LLP) for Town of Ramapo. Michael John Dell (Kramer Levin Naftalis & Frankel LLP) for Ramapo Local Development Corp. Alan M. Lieberman (Blank Rome LLP) for Nachman Aaron Troodler.

The case is No. 16-cv-2779 (Oberman) (Klein) (Troodler).

Companies: Ramapo Local Development Corp.

MainStory: TopStory Enforcement FraudManipulation MunicipalSecuritiesNews NewYorkNews

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