WASHINGTON — A U.S. district court judge has scheduled a trial for late summer of next year in the Securities and Exchange Commission case against the city of Miami and Michael Boudreaux, the city's former budget director.
Judge Cecilia Altonaga also ordered both sides in the case, which muni lawyers are watching for its potential to set precedents, to schedule mediation by Sept. 14 and complete it by May 9 of next year. She also referred the case to Judge John O'Sullivan, who also sits on the U.S. District Court for the Southern District of Florida.
Miami, Boudreaux, and the SEC are expected to meet with O'Sullivan on Aug. 16, 2016 to set the start date of the trial, which would likely be sometime during the week of Aug. 22 of that year.
The case, which the SEC filed in July 2013, was recently reopened after being put on hold last year for Boudreaux to pursue a lengthy appeals process that was cut short after the Supreme Court declined to take up the case. The trial had originally been scheduled to start on June 1 of this year until it was put on hold.
The SEC has alleged Boudreaux and Miami made materially false and misleading statements and omissions about interfund transfers designed to cover up a growing general fund deficit and get more favorable bond ratings for offerings in May, July and December of 2009 totaling about $153.5 million. The commission has also charged the two parties included false and misleading information in Miami's fiscal year 2007 and 2008 comprehensive annual financial reports.
The SEC suit, which is seeking civil penalties from Miami and Boudreaux, charges the city with violating a cease-and-desist order imposed in 2003 for similar charges stemming from bond offerings in 1995 where Miami misled investors about the city's worsening financial condition.
Lawyers have said the SEC's civil penalty requests are noteworthy in that the commission is asking for money from a city official and a municipality that draws revenue from taxpayers. But SEC Commissioner Daniel Gallagher and some enforcement officials have been pushing for the commission to be tougher on governmental issuers and their officials when they commit fraud. Miami's alleged violation of the cease and desist order is serious, because it agreed in the earlier case to refrain from violating the securities fraud laws in the future.
The suit also charges Boudreaux with aiding and abetting the city's violations of Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, on securities fraud and disclosures. Miami has argued against the SEC, saying the commission's complaint does not directly connect the allegedly misleading documents from 2007 and 2008 to the 2009 bond offerings.
Boudreaux has argued he has qualified immunity because he was acting within the scope of his official duties when he signed off on the fund transfers that the SEC said were designed to mask financial shortcomings in Miami's general fund and help obtain better bond ratings. That argument was the basis for his appeal that ended with the Supreme Court officially declining to hear the case on June 29.
