WASHINGTON — The Securities and Exchange Commission filed motions arguing it met the burden of proof necessary to move forward with securities fraud allegations against Miami and its former budget director.
The SEC responses filed late Friday with the U.S. District Court for the Southern District of Florida ask judge Cecilia Altonaga not to grant the defendants' motions to dismiss, arguing that ex-budget director Michael Boudreaux is using an invalid "qualified immunity" defense.
The SEC suit charges Miami it with three counts of securities fraud for making "misrepresentations and omissions to investors" in 2009 bond offering documents and financial statements over interfund budget transfers allegedly designed to "mask" a deficit in the city's general fund. The SEC claims that Boudreaux, who was fired in 2010 and now lives in New Orleans, proposed fund transfers that improperly appropriated money, which prevented the city from meeting its legally-required reserve of 20% of annual revenue.
Miami and Boudreaux had filed motions to dismiss. Miami attacked the SEC lawsuit for failing to connect alleged misrepresentations and omissions about the city's budget to the sale of the 2009 bonds specified in the complaint, while Boudreaux argued that he is entitled to immunity from the suit because he was a city employee carrying out basic functions and was not acting alone or profiting by the alleged misconduct.
The SEC response characterizes all the city's arguments as "baseless," arguing that the commission has more than met the burden required under the federal civil procedure rules by "clearly alleging what misstatements and omissions the city made, when the city made them, how and to whom the city made them, and why the city's statements were false and misleading." The commission also countered Miami's contention that the court can not impose a civil penalty on the city, something the SEC has rarely sought and only once collected from a municipality.
"The court can impose civil penalties against the city, since the federal securities laws expressly include a municipality as a party which the court can impose civil penalties against," the SEC filing states.
The commission told the court that Boudreaux's defense team is misinterpreting the defense it is using, because the SEC is seeking only an injunction against Boudreaux.
"Qualified immunity does not apply to cases seeking injunctive relief," the SEC filing states. "The commission's complaint alleges an injunctive action against Boudreaux and therefore qualified immunity cannot apply to dismiss this case as a matter of law. The fact that the commission also seeks a civil penalty does not alter this conclusion because qualified immunity is a defense to suit, and not a defense to liability or relief."
The defendants have about 10 days to respond, an attorney working on the case said. Oral argument on the motions will be held later this month, and the judge could rule at any time after that. If the case goes forward, a two-week window for trial has already been set beginning Sept. 29 of next year.