WASHINGTON — The Securities and Exchange Commission's fraud case against Miami and its former budget director Michael Boudreaux is on hold pending Boudreaux's appeal of a federal court decision to invalidate his effort to claim immunity from the lawsuit.

Boudreaux's appeal to the U.S. Court of Appeals for the Eleventh Circuit, filed Jan. 28., seeks to overturn federal district judge Cecilia Altonaga's decision to deny his motion to dismiss the SEC's case against him. The SEC suit charges Miami with 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 initiated by Boudreaux and allegedly designed to "mask" a deficit in the city's general fund.

Both the city and Boudreaux have denied any wrongdoing and are fighting the charges.

Boudreaux is arguing that because he was acting within the scope of his official duties, he is entitled to "qualified immunity" from being sued. This defense has its roots in common law, Boudreaux's attorneys argue, that is designed to protect public officials from having their official conduct challenged.

Miami also moved to dismiss the case, arguing that the SEC failed to adequately connect alleged misrepresentations and omissions about the city's budget to the sale of the bonds. Altonaga was sympathetic to Miami's claims that some of the evidence presented by the SEC is immaterial to the 2009 bond offering, but ruled that she was required to view the evidence in a light most favorable to the SEC.

Altonaga denied both motions last month, but agreed to halt proceedings in the civil case until Boudreaux's appeal is heard. Defendants cannot normally appeal a lower court judge's decision immediately, but because Boudreaux's qualified immunity claim is a defense against being sued at all, he is allowed to do so.

Miami is unable to appeal until after the case has run its course in the U.S. District Court for the Southern District of Florida, but because the city and Boudreaux are co-defendants the entire case will stop for the several months it generally takes for an appellate court to render a decision.

Boudreaux's motion for a stay of the civil suit argues that allowing proceedings to go forward while the appeal is in process would be counterproductive. "Allowing portions of this case to proceed while Boudreaux's appeal is pending will be distractive to Boudreaux, disruptive to the court and its schedule, and detrimental to the avoidance of inefficient piecemeal litigation," the motion states.

Altonaga granted it on Jan. 30. Benedict Kuehne, Boudreaux's attorney, said his client was grateful for the ruling.

"He is appreciative the federal court is allowing his legal team to focus on the important legal issue of qualified immunity for his work done in the course and scope of his official responsibilities to the City of Miami," Kuehne said.

The case is one of several 2013 SEC actions that observers have called precedent-setting or significant. The SEC is seeking financial penalties from the city, a rare measure against a municipality and is flagging the city for being a recidivist offender because it was already under a cease and desist order from a previous muni case. The SEC's decision to charge Boudreaux appears to signal a move toward holding more individuals responsible for fraud in the muni space, attorneys have said.

A two-week window for trial was already set beginning on Sept. 29, and has not yet been rescheduled.

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