Father and son plead guilty to defrauding Arizona sports complex bondholders

Bloomberg News

A father and his son pleaded guilty on Wednesday to securities fraud and aggravated identity theft in connection with roughly $284 million of municipal bonds sold for an Arizona sports complex, a major step toward bringing to a close one chapter in this tale of bond offerings gone bad. 

Randy Miller, 70, and Chad Miller, 41, entered the guilty pleas before U.S. Magistrate Judge Robyn F. Tarnofsky and will be sentenced before U.S. District Judge Lewis A. Kaplan at a later date, the U.S. Attorney's Office for the Southern District of New York said in a press release Wednesday. 

The Millers, both of Phoenix, Arizona, each pleaded guilty to one count of securities fraud, which carries a maximum sentence of five years in prison, and one count of aggravated identity theft, which carries a mandatory consecutive sentence of two years in prison, the release said. 

Monetary judgments were also entered as part of the duo's guilty pleas, with a judgment in the amount of $7,289,134.89 entered against Randy Miller and a judgment totaling $4,798,980.19 entered against Chad Miller. 

The maximum potential sentence in the case was provided for informational purposes only, the release said, adding that any sentencing of the defendants would be determined by a judge. 

"Randy and Chad Miller's fraudulent actions resulted in nearly total losses for investors," Jay Clayton, the interim U.S. attorney for the Southern District of New York, said in the release, adding that case "demonstrates the strength of our partnership with the FBI, whose diligent investigation uncovered the defendants' fraud."

Clayton, a former Securities and Exchange Commission chairman, also thanked the SEC, which had filed a parallel civil action, the release noted. 

In connection with bond offerings for the sports complex in Mesa – an initial offering in August 2020 and a "supplemental" one in June of 2021 – the Millers lied to potential investors about interest from sports organizations and other potential customers in relation to using or relocating to the complex, known as Legacy Park, according to the release, which referenced "allegations contained in the Indictment, the Superseding Information, public filings, and statements made in court." 

The August 2020 offering raised approximately $251 million, while the June 2021 offering raised about $33 million, according to the indictment, which was unsealed April 1. 

"The defendants and their associates forged and altered purported 'binding' letters of intent and other documents from those potential customers to make it appear that the customers were committing to holding many events at Legacy Park, with a significant number of spectators, and agreeing to pay large fees – all far beyond what the organizations were considering, if they were considering Legacy Park at all," the release said. 

The Millers "presented the fraudulent documents to prospective bond investors and incorporated them into their solicitation materials by claiming that Legacy Park would be 100% occupied at opening and would generate nearly $100 million in revenue in its first year of operations, more than enough to cover the bond payments," the release said. 

The bonds were issued for the benefit of Legacy Cares, an Arizona nonprofit corporation, according to the SEC's complaint, filed April 1. Legacy Cares issued the bonds via the Arizona Industrial Development Authority, a conduit issuer.  Legacy Cares defaulted on both the 2020 and 2021 bonds in October 2022 and filed for bankruptcy in May 2023, the complaint said. 

"The project was later sold in bankruptcy for less than $26 million," the release from the U.S. Attorney's Office said. "Of those proceeds, less than $2.5 million went to repay the approximately $284 million owed to Legacy Park bondholders."

An SEC spokesperson on Thursday declined to comment regarding the guilty pleas by Randy Miller and Chad Miller. 

Prior to the actions by the U.S. Attorney's Office and the SEC, burned bondholders had filed two lawsuits against underwriter Ziegler, bond counsel Gust Rosenfeld, Legacy Sports, and both Millers in Maricopa County Superior Court. The lawsuits were later consolidated into one complaint.