WASHINGTON – Former Miami budget director Michael Boudreaux plans to ask a federal district court by Jan. 3 to vacate a jury's verdict that he was guilty of securities fraud, according to his lawyer.
Benedict Kuehne, Boudreaux's lawyer, said his client has until Jan. 3 to seek a new trial or annulment of Judge Cecelia Altonaga's judgment imposing a $15,000 penalty in the Securities and Exchange Commission fraud case against him.
Altonaga sits on the U.S. District Court for the Southern District of Florida in Miami.
"Mr. Boudreaux and his legal team are actively working to submit a timely post-judgment motion challenging the jury's verdicts," Kuehne said. "The post-trial motion will demonstrate that the jury's verdicts finding Mr. Boudreaux not liable for the principal securities fraud count and only liable for the three underlying violations are legally questionable."
Kuehne's statements refer to the jury's Sept. 14 verdicts against his client and the city of Miami that seemed to be contradictory. The jury found that Boudreaux was guilty of three of the four counts the SEC had alleged, including that he violated a portion of SEC Rule 10b-5 by using a "device, scheme, or artifice to defraud" in connection with the purchase or sale of securities. However, the jury found Boudreaux not guilty on a count based on Section 17(a)(1) of the Securities Act of 1933, which would have required the jury to conclude that Boudreaux "used a device, scheme, or artifice to defraud in connection with the offer to sell or sale of any securities."
The jury found Miami guilty on each count the SEC alleged and the city has since agreed to settle for $1 million. Miami was under a cease-and-desist order stemming from a 2003 fraud case at the time of these more recent violations.
Kuehne added that Boudreaux also intends to argue that the SEC's effort to hold him "responsible for the city's failings many years before he joined the city as an employee was significantly and unfairly prejudicial to his defense, resulting in an incorrect verdict."
The SEC had originally sought a $450,000 penalty against Boudreaux coupled with an injunction against committing future securities law violations. Altonaga, however, called the commission's request "overreaching and punitive" in a Dec. 5 order and instead levied the $15,000 penalty. She denied the SEC's request for an injunction against Boudreaux after finding that the commission had not shown that there was a reasonable likelihood that he would commit future violations without the injunction.
She also wrote that the past three years of litigation in the case "serve as significant punishment and deterrence for Boudreaux's conduct in light of the record" and concluded that "future municipal employees will likely be very cautious when advising their employers on the transfer of funds between accounts."
The SEC filed its complaint against Miami and Boudreaux in 2013 alleging that, starting in 2008, they misled investors about interfund transfers that were designed to cover up a growing general fund deficit during its fiscal years 2007 and 2008. The SEC said the misleading transfers were also meant to get more favorable bond ratings for offerings in May, July, and December 2009.
The alleged omissions and misrepresentations were made in: offering documents for the three bond transactions in 2009 that totaled $153.5 million; presentations to bond rating agencies; and the city's comprehensive annual financial reports (CAFRs) for fiscal years 2007 and 2008, according to the SEC.
The city disclosed the interfund transfers in each of their CAFRs and official statements but, according to the SEC, said the transfers contained money that was not expended and was returned to the general fund. In reality, that money had already been pledged to several ongoing capital projects and some of it was restricted by city law for designated purposes and not the general fund, the SEC said. Thus, the funds that were transferred should not have been considered unallocated, the commission said.