Ramapo, N.Y.'s A1 rating from Moody's Investors Service is on review for downgrade in the wake of federal fraud charges alleging misstatements of financial reporting to finance a $60 million minor league baseball stadium.
Friday's ratings action impacts $146 million in outstanding debt for the township in Rockland County, about 25 miles north of New York City. The Securities and Exchange Commission and the U.S. District Attorney for the Southern District of New York filed civil and criminal charges against Ramapo officials Thursday alleging that they mislead investors by showing that finances were in sound condition when they issued bonds for Provident Bank Park.
"The ramifications of these allegations with respect to the town's recent financial reporting and current position are unknown, but could be significant if Ramapo's as-reported situation has been materially over-stated," said Moody's analyst Tiphany Lee-Allen. "During the review period, Moody's will attempt gather additional details on the charges, including those related to misrepresentation of the town's financial operations, current financial position, and near-term liquidity."
The indictment spearheaded by U.S. attorney Preet Brahara includes 22 counts of wire fraud, securities fraud and conspiracy to commit securities fraud against Town Supervisor Christopher St. Lawrence as well as Aaron Troodler, former executive director of the Ramapo Local Development Corp., which issued bonds for the stadium. Also charged were town attorney Michael Klein and Nathan Oberman, the town's deputy finance director. Investigators said the defendants tried to conceal the town's deteriorating general fund that faced deficits ranging between $250,000 and $14 million from fiscal years 2009 to 2014.
Phil Tisi, Ramapo's public information coordinator, said that the town is operating normally since the charges and that St. Lawrence arrived for work at 7:30 a.m. Friday. St. Lawrence's attorneys have not returned calls seeking comment.
Bharara in a press conference said Ramapo will face repercussions from the alleged fraud in the form of increased debt, higher borrowing costs and being forced to operate the money-losing stadium. The 4,500-seat stadium opened in June 2011 and is home to the Rockland Boulders. an independent minor league baseball team.
Bharara emphasized that the indictment is believed to be first in its kind municipal bond fraud case that has been brought against government officials. He noted that municipal bond corruption will be an increased focus of his office and other regulators.
"It stands to reason that when you develop some understanding and expertise of a particular kind of crime taking place and when you have a $3.7 trillion dollar market that you take a look at other places where red flags are raised," said Bharara. "People are going to be looking at these things more than you've seen in the past."
