SEC Begins Probe of City's Books
The investigation will likely hold up bond offerings for parking lots at the new Marlins Stadium, a park, and a port tunnel.
Get ready to maybe be covered in shame again, City seal!
The '80s have been back and are on the way out again. Now it looks like the '90s are in fashion, at least where the City of Miami's accounting is concerned.
Investigators for the Securities and Exchange Commission have ordered the city to turn over financial records -- as well as e-mails, hard drives, documents, and files -- relating to the transfers of funds that aided the City's bottom line during times it shopped bonds to float city projects.
It doesn't take an investments expert to know this doesn't bode well. The SEC wants to determine whether or not the City misrepresented its financial position to rating agencies and investors between 2006 and 2009, an act that would amount to fraud.
The inquiry, first announced by the Miami Herald when it obtained a confidential letter delivered to the city Friday, is the most signficant since corruption, mismanagement, and loose controls caused the State of Florida to take over the city's finances in 1996.
At that time, the city attempted to hide a $68 million deficit by shifting money around several hundred accounts; at the center of the current investigation is the transfer of $26.4 million from two unspent capital-funds stores into the city's general account, a move that decreased the city's overall deficit while bond rating companies were compiling reports for public projects to be financed at least partially through the sale of bonds.
The two accounts in question were identified by budget director Michael Boudreaux; he said he determined that the millions remaining were from finished or canceled projects and transfered the money "legitimately."
"It was reviewed completely by everybody,'' he told the Herald. "If it wasn't legitimate, it would have been noted then. And that wasn't the case."
What it was was contested, but only among high-ranking city officials including finance director Diana Gomez, who protested that the move masked the city's true financial issues from Commissioners. Despite the internal debate, the transfer was made largely out of the public eye.
Until now, that is: the SEC is also asking for all paperwork relating to the transactions from all the financial institutions that dealt with the bond offerings as well as McGladrey & Pullen, the firm that produces the city's annual financial reports.
The previous financial crisis "should have been a wake-up call," said the SEC prosecutor on that case, Mitch Herr.
"It would be extremely disappointing if the city had engaged in that kind of behavior again."
Agreed. Especially if it means we've got to bust out our giant flannels and walk around all depressed again.
