Town of Rochester has resolved its case with the Securities and Trade Fee. The lawsuit towards the town and its former finance director, Rosalind Brooks-Harris, is now closed.
In 2022, the SEC charged the town, Brooks-Harris and Everton Sewell, former chief monetary officer of the Rochester Metropolis College District, with deceptive buyers in a $119 million bond providing. Additionally charged within the case had been Rochester’s municipal advisor Capital Markets Advisors LLC, its principal Richard Ganci and co-principal Richard Tortora.
The SEC alleged that in 2019 the defendants misled buyers with bond providing paperwork that included outdated monetary statements for RCSD and didn’t point out that the district was experiencing monetary misery attributable to overspending on instructor salaries, SEC paperwork present.
“We allege that the Rochester Metropolis College District’s monetary well being was vital to buyers, who had been relying on the district because the anticipated supply of reimbursement,” mentioned LeeAnn Ghazil Gaunt, chief of the Enforcement Division’s Public Finance Abuse Unit, in April 2022. “As described in our grievance, these defendants failed to tell buyers of the intense monetary difficulties the district was experiencing on the time of the providing.”
When the fees had been introduced in 2022, the SEC mentioned Sewell agreed to settle by consenting, with out admitting or denying any findings, to a courtroom order prohibiting him from future violations of antifraud provisions and from taking part in future municipal securities choices. He additionally was required to pay a $25,000 penalty.
Metropolis officers mentioned the settlement, endorsed right this moment by Elizabeth Wolford, chief U.S. District Decide for the Western District of New York, requires no financial fee and no monitorship. Town and Brooks-Harris have agreed to forward-looking injunctions solely, the town says.
So far as the town and its exterior counsel know, each municipal case settled by the SEC thus far has required fee of civil penalties, engagement of an costly monitor, or each. These phrases will not be required as a part of this settlement.
“We’re extraordinarily happy with this consequence,” says Mayor Malik Evans. “This completes a protracted authorized argument that we felt assured in pursuing. I’m particularly proud that the town stood by its promise to guard its staff, no matter whose administration they labored in.”
The decision is a win for the town. It typically stresses that RSCD operates independently of the town’s fiscal oversight. Although the town makes necessary budgetary commitments every year, and is legally obligated to concern debt on RCSD’s behalf, the district is a separate authorized and municipal entity, officers say.
“This precedent was price combating for, for metropolis staff,” says Councilmember Mitch Gruber, chair of Metropolis Council’s Finance Committee. “No metropolis worker ought to face monetary penalties for conditions which might be squarely out of their management.”
“That is an exceptionally optimistic results of the town’s targeted and constant efforts on this case,” says Brian Feldman, accomplice at Aurelian Legislation, the town’s exterior authorized counsel for the SEC litigation. “These favorable phrases appear to be unprecedented.”
Officers say that as a part of the settlement, the town neither admitted nor denied the SEC’s allegations.
In April, the U.S. District Court docket granted the SEC partial abstract judgment towards CMA, Ganci and Tortora. The courtroom discovered that the defendants breached fiduciary duties owed to their municipal entity shoppers and violated Municipal Securities Rulemaking Board guidelines. The order granting abstract judgment resolved the SEC’s claims towards Tortora.
Smriti Jacob is Rochester Beacon managing editor. The Beacon welcomes feedback and letters from readers who adhere to our remark coverage together with use of their full, actual identify. Submissions to the Letters web page ought to be despatched to [email protected].
