PHOENIX - The Securities and Exchange Commission has charged David Webb, Jr., the former mayor of Markham, Ill., with fraud for engaging in a pay-to-play scheme in connection with a 2012 bond offering by the city.

In a complaint filed Friday in the U.S. District Court for the Northern District of Illinois, the SEC alleges that Webb engaged in a pay-to-play scheme by soliciting and receiving a $75,000 bribe from a construction contractor in exchange for a promise that Webb would secure a multi-million-dollar bond-financed city construction project for the contractor.

At a Markham City Council meeting one month later, the SEC said, Webb responded to a question about the potential improper use of bond proceeds by assuring the council that he did not "make deals," despite having recently solicited and received the bribe.

New disclosure items on the SEC's revised Form ADV includes additional disclosure requirements for RIAs.
Bloomberg News

Webb, 69, was mayor of the Cook County city south of Chicago from 2001 until May 3 of this year.

He partially settled the SEC’s charges by agreeing to be barred from participating in future municipal bond offerings, and to be enjoined from future violations of the federal antifraud laws. Webb was charged under both Section 17(a)(1) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, both of which make it illegal to “employ any device, scheme, or artifice to defraud.” Webb acted “knowingly or recklessly” in his conduct, the SEC said.

A judge will determine the amount of disgorgement and penalties, if any, to be imposed, and the settlement is subject to court approval.

The bonds in question were $5.5 million issued in May 2012, which was rated BBB by S&P Global Ratings then and has since been now downgraded to B-plus. The money was used to acquire a roller rink and develop a park.

Webb came under scrutiny from a member of the public at a city council meeting discussing the planned issuance, because the seller of the roller rink was the mother of the Markham city attorney. The SEC said that Webb brushed the concern off, saying “I don’t want no one plastering my name saying that I made a deal. I don’t make deals.” The council approved the bond issuance by a 3-1 vote.

Webb selected the contractor for the park development and signed the design-build agreement on behalf of the city after the contractor wrote a check and deposited the $75,000 into a shell company controlled by Webb, the SEC said.

A second check for $10,000 was also deposited to the shell company when the project was nearly complete, the SEC alleged. The city used more than half the bond funds for that park project.

The information would have been important to both the city council and to investors when making decisions whether or not to issue the bonds or purchase them, the SEC told the court. The complaint cites an unnamed investor who told the SEC that the knowledge of corruption connected to the bonds would have been an important consideration in whether or not to buy them.

The SEC complaint does not specify any amount, but asks the court to levy “appropriate civil penalties” on Webb.

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Kyle Glazier

Kyle Glazier

Kyle Glazier is a reporter covering market trends, infrastructure, and the Far West region for The Bond Buyer.