CHICAGO — The former comptroller of Harvey, Ill., has been fined and barred from future municipal bond offerings for materially misleading investors about several bond offerings from the city.

U.S. District Judge Amy J. St. Eve in the Northern District of Illinois entered a default judgment against Joseph T. Letke on Tuesday.

He was ordered to pay more than $200,000 in fines.

The Securities and Exchange Commission sought the judgment against Letke, who sought hearing delays and still failed to answer the complaint.

The judgment brings to a close the civil case the SEC launched in June accusing the city and Letke of misleading investors on several bond offerings by diverting bond proceeds from their intended use. Harvey settled the case in December.

The judgment is among the first to bar a former municipal official from participating in future bond offerings. The SEC sought the same permanent injunction against two Allen Park, Mich., officials in November, and a federal judge granted that condition in a settlement Wednesday. In 2012, the SEC sought to bar former Detroit Mayor Kwame Kilpatrick and the city's former treasurer from participating in any decisions involving investments in securities by public pensions.

Letke is "permanently restrained and enjoined from, directly or indirectly, participating in any municipal securities offerings as an adviser or consultant to any participant in such an offering."

The judgment further enjoins Letke from future violations of various securities laws. He was also ordered to pay $217,000 in fines, which includes the disgorgement of $164,000, prejudgment interest and a civil penalty of $30,000.

"By abusing his position of trust as a Harvey public official and as a financial advisor to Harvey over a multi-year period, Letke has demonstrated that he is unfit to participate in municipal securities offerings," said the SEC's request for a default judgment. "Accordingly, the court should bar Letke from future participation in municipal securities offerings to protect investors against possible future misconduct by Letke."

The SEC's June complaint marked the first instance in which the agency sought an emergency court order to halt a municipal bond offering. The court granted the temporary injunction when it discovered during the course of an investigation into the city's use of past bond proceeds that Harvey was planning to issue more bonds.

SEC investigators found that Harvey had diverted about $1.7 million from offerings that were supposed to finance a hotel and conference center. The unfinished project was abandoned. The official statements made no mention of proceeds being diverted.

The complaint accused Letke of pocketing hundreds of thousands of illicit bond proceeds through a years-long scheme that began in 2008 and involved bond issues in 2008, 2009, and 2010 to finance the hotel project in the financially stressed suburb hungry for economic development.

Letke invoked his Fifth Amendment right against self-incrimination. The complaint outlined a scheme in which Letke, a certified public accountant, received "undisclosed payments" from the developer while also receiving city consulting fees.

Letke owned private firms that benefitted from city work and the bond sales. In addition to serving as comptroller, he operated the firm Letke & Associates, Inc., and is a principal shareholder in Alli Financial and Public Funding Enterprises, the SEC complaint said.

In addition to Letke's improper pocketing of bond proceeds, other proceeds were also improperly steered to support the city's operations including its payroll.

Letke and his firm served as a financial advisor to Harvey in connection with the 2008, 2009 and 2010 financings. In total, the SEC said, Letke and his businesses received at least $1.9 million between 2008 and 2010 relating to work for the city. He also received "undisclosed" fees that added to his compensation and were not reported in offering statements.

"Harvey's bond investors were misled into believing their money would go toward construction of a Holiday Inn when instead the bulk of it was diverted into Harvey's general coffers and Letke's pocket," said David Glockner, director of SEC's Chicago Regional Office, in a previous statement.

The bonds were sold with a limited obligation backing. Depending on the issue, revenue streams dedicated to supporting the bonds included a hotel-motel tax, sales tax revenue, or revenue generated within the project's tax-increment financing district.

Letke was also in line to receive fees tied to the proposed 2014 bond issue that was halted by the SEC action, for his work as advisor to the city and preparing a feasibility study on the projects through a private company. The 2014 issue was also structured as a limited obligation of the city payable from TIF revenues. Proceeds were supposed to fund construction of a grocery store.

Letke has come under scrutiny for his consulting role in other south suburban municipalities and agencies like the South Suburban Joint Action Water Agency.

That consulting work is the subject of a separate federal probe, according to published reports. Letke also served as comptroller to several south suburban communities.

The city in December agreed to cease violating federal securities laws and to hire an independent consultant and audit firm as part of its settlement in which it did not admit or deny the SEC allegations. The city also agreed to a prohibition against issuing municipal bonds for three years unless it uses an independent disclosure counsel for offerings. The choice of disclosure counsel must be acceptable to the SEC. City officials said the settlement will allow it to move forward as its fiscal troubles continue.

Kyle Glazier contributed to this article

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