The SEC’s Zehner told a federal court that the SEC investigated the Allen Park case very thoroughly before deciding who to charge.

WASHINGTON - The Securities and Exchange Commission is urging a federal court to accept the settlements it had reached with two former officials of the city of Allen Park, Mich., in November, after the court vacated them a day later and asked for more information.

The SEC made the request in the U.S. District Court for the Eastern District of Michigan's southern division in an effort to close litigation between it, the Detroit suburb of Allen Park, and two former officials in connection with $31 million of general obligation bonds floated in 2009 and 2010 that were to have financed a now-failed movie studio. The former officials were Gary Burtka, who was mayor, and Eric Waidelich, who was city administrator.

The commission charged the bond documents contained false and misleading statements about the scope and viability of the movie studio project, as well as Allen Park's overall financial condition and its ability to pay debt service.

The three defendants had reached separate settlements with the SEC. The city's settlement was reached in an SEC administrative proceeding. The other two settlements had to be approved by the court, but U.S. District Judge Avern Cohn issued an order to vacate the final judgments on Nov. 7.

Cohn called the judgments "improvidently entered," saying the court needed more information about the case, in particular about the role of the finance firms involved in the sale of the bonds.

In its latest filings with the court, the commission argued that the court should approve the settlements because they fairly settle its complaints. Waidelich agreed to be barred from participating in any municipal bond offerings and to cease and desist from further violations. Burtka agreed to pay a $10,000 penalty as well as to cease and desist from violations and be barred from future offerings. Both men agreed to the settlements without either admitting or denying the SEC's findings.

Recent case law has established the standard for entering a consent settlement in an SEC action is that the terms be "fair and reasonable" and that "the public interest … not be disserved," the SEC wrote.

"The consent judgments proposed in the instant proceedings measure up to this standard. The judgments impose permanent injunctions and civil penalties, two forms of relief which are explicitly authorized by the Securities Exchange Act of 1934 and the Securities Act of 1933. The terms of the judgments are clear. The judgments resolve the claims in the SEC's complaints. The consents and judgments are not tainted by improper collusion or corruption of any sort."

Mark Zehner, deputy chief of the SEC enforcement division's municipal securities and public pensions unit, submitted a declaration stating that the SEC looked very carefully at all the participants in the alleged fraudulent financing and made careful choices about who to charge. Homing in on the judge's concerns, Zehner added that because the bonds were competitively underwritten, the underwriters were privy to little more knowledge than investors.

"The SEC took sworn testimony from close to two dozen witnesses, some on multiple occasions, and subpoenaed documents from scores of parties, including the city, the defendants, the financial advisor, bond counsel, underwriters, the city attorney, banks, public entities, and others," he wrote.

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