LOS ANGELES — The Securities and Exchange Commission is among the last to close the book on a dark chapter in the history of Bell, Calif., the working-class Los Angeles-area city where several members of the former administration were jailed last year for defrauding the city of millions.
The SEC concluded, without recommending an enforcement action, an investigation it launched into the city's bond debt October 10, 2010 after fraud perpetuated on the city by the former administration came to light, according to a filing posted Feb. 23 on the Municipal Rulemaking Board's EMMA website.
The SEC's investigation was considering whether false statements and disclosure lapses had occurred in issuing bonds during the former administration's tenure. Federal investigators seized documents to evaluate those factors related to the use of bond proceeds, the revenue and/or taxes pledged to repay the bonds, and the financial health of the city, according to the disclosure.
The commission notified the city on Feb. 18 that it had concluded the investigation and did not intend to recommend an enforcement action against the city, according to the disclosure document posted by Josh Betta, the city's finance director.
The city had reduced its outstanding bond debt to $74 million by year-end 2014, from $137 million in June 2012 when Doug Willmore became city manager, Betta said. It reduced the debt by refunding some and by paying off a substantial amount including a $35 million bond that had been privately placed through Dexia, a Franco-Belgian bank.
The SEC reviewed documents related to $184 million in debt issued by the city from November 2004 through September 2007. Investigators looked at $40 million in general obligation bonds issued directly by the city in two series, $27.9 million in 2003 tax allocation refunding bonds issued by the city's redevelopment agency, $9.2 million in 2005 taxable pension revenue bonds issued by a public financing authority and $20.1 million in 2005 lease revenue refunding bonds issued by the city's housing authority.
A letter from Robert Conrad, SEC assistant regional director, said the commission has concluded its investigation, nor does it intend to recommend enforcement action. The letter, however, includes a caveat that the notice "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation."
The letter posted on EMMA was sent to Anita Luck, an attorney with Aeshire & Wynder, who represents the city.
The city defaulted on the bonds held by Dexia that were secured by lease revenue from certain properties, and the lease was invalidated by a lawsuit. The city closed Dec. 6, 2013 on an agreement with Dexia in which the city paid the company $29 million, rather than the $35 million owed for principal and interest on the bonds.
Early last year, the city's former city manager, Robert Rizzo; its former assistant city manager, Angela Spaccia; its former mayor and all but one council member from that era were sentenced following convictions for misappropriating funds. Rizzo, considered the mastermind, was sentenced to 12 years in prison and $9 million restitution in April.