WASHINGTON — A federal judge has issued an order for mediation between Miami, Fla. and the Securities and Exchange Commission, a step the SEC said is required for its securities fraud case against the city and its former budget director.
Miami, the SEC, and former Miami budget director Michael Boudreaux filed documents with the U.S. District Court for the Southern District of Florida Oct. 3 indicating that all involved had agreed to a mediation hearing on May 19 of the coming year.
The SEC filed the suit against Miami in July, alleging three counts of securities fraud for making "numerous material misrepresentations and omissions to investors" in 2009 bond offering documents and financial statements over interfund budget transfers designed to "mask" a deficit in the city's general fund. The SEC is seeking financial penalties from the city, a rare measure against a municipality.
Miami, already under a cease and desist order from a previous case, denied wrongdoing and vowed to "vigorously defend" itself in court. A joint scheduling report filed with the court last month indicated that all parties agreed a settlement was unlikely.
On Oct. 4, the judge signed an order directing the parties to appear in mediation with Miami attorney Gerald Wald of Murai Wald Biondo Moreno & Pegg, P.A. Wald said he had been contacted last month as a possible mediator on the case, but was unaware of having been selected and was not yet familiar with the details of the lawsuit. Wald said the mediator functions as a neutral party helping litigants reach an amicable solution.
Eric Bustillo, regional director of the SEC's Miami office, said mediation is a requirement of the process and does not necessarily mean the commission is any closer to settling with the city or with Boudreaux.
"Mediation is completely uneventful," Bustillo said. "You can't read too far into it."
Though the mediation date has been set for the middle of next year, Bustillo said the case will continue to move through the pre-trial litigation phase. A two-week window for trial has already been set beginning Sept. 29 of next year.
Bond lawyers have said they see the case as a shot across the bow of other municipalities who have been hit with cease and desist orders by the SEC, as Miami was in 2003. The case may also indicate that the SEC is serious about targeting individual wrongdoers in the muni space, something it has not done with regularity before. Miami has until Oct. 11 to file its response to the charges with the court.