City Of San Diego Sanctioned For Fraudulent Bond Offerings

On November 14, 2006, the SEC entered an order sanctioning the City of San Diego in a settled administrative proceeding based on multiple fraudulent municipal bond offerings. According to the Order, the City of San Diego engaged in fraud by making misleading statements to investors in five municipal bond offerings in 2002 and 2003. Specifically, the Order discusses that the City made misleading statements in: (1) its “official statements” to investors, which were intended to disclose material information and in the “preliminary official statements” that were used to gauge investor interest in the offerings; (2) presentations to credit rating agencies; and (3) in “continuing disclosure statements” about the financial condition of the City. When the City later fully disclosed its financial condition in 2004, the credit rating agencies lowered its credit rating. The Order directed the City to cease and desist from committing violations of the antifraud provisions of the securities laws and to retain an independent consultant to review and assess its policies and procedures regarding disclosures and to make recommendations on these matters. The City agreed to adopt the consultant’s recommendations.