Three Ramapo, N.Y., officials get lifetime bars from muni offerings
WASHINGTON – Three Ramapo, N.Y., officials have received lifetime bars prohibiting them from participating in muni bond offerings for allegedly concealing the town's financial troubles in bond documents related to 16 muni offerings made over five years, the Securities and Exchange Commission announced on Friday.
The three officials are: N. Aaron Troodler, assistant town attorney and former executive director of the Ramapo Local Development Corp.; Nathan Oberman, deputy finance director; and Michael Klein, town attorney.
The lifetime bars were part of final judgments issued on June 6 by Judge Cathy Seibel of the U.S. District Court for the Southern District of New York in Manhattan. In addition, Klein and Oberman were ordered to pay $25,000 and $10,000 in civil penalties and to resign and be barred from employment with Ramapo for seven and five years, respectively.
Klein and Oberman consented to the judgments without admitting or denying the allegations by the SEC.
Troodler previously pleaded guilty to criminal charges in a parallel case brought by the U.S. Attorney’s Office for the Southern District of New York. He avoided jail time but was ordered to pay a $20,000 fine and lost his license to practice law.
All three men were permanently enjoined from violating the securities fraud laws in the future as part of Seibel’s final judgment in the SEC’s civil case against them.
SEC filed fraud charges against the three and Christopher St. Lawrence, who was RLDC’s president, town supervisor, and the alleged mastermind of the scheme, on April 14, 2016.
The commission alleged that they resorted to fraud to hide the strain in the town’s finances caused by the roughly $60 million cost of building a baseball stadium as well as the town’s declining sales and property tax revenues.
The SEC charged that they cooked the books of the town’s primary operating fund to show positive balances of between $1.4 million and $4.2 million during six years when Ramapo actually had accumulated deficits as high as almost $14 million.
In addition, the stadium bonds issued by RLDC were guaranteed by the town and investors were unaware that the town would probably have to subsidize the bond payments, which would further deplete its general fund.
The inflated fund balance was used in offering materials for the bonds, which were offered between September 2010 and September 2015, the SEC found.
Troodler concealed from investors that the RLDC’s operating revenues were insufficient to cover debt service on the bonds issued to finance the stadium, the SEC said.
Klein helped conceal outstanding liabilities related to the stadium and repeatedly misled Ramapo’s auditors about the collection of $3.08 million in the town’s general fund for the sale of a 13.5 acre parcel of land to RLDC. The title of the property was never transferred from the town to RLDC.
Troodler helped hide the fictitious sale and boost the town’s general fund account balance by approving RLDC financial statements reflecting the purchase of property, which never occurred, the SEC said. He also signed offering documents containing another false $3.66 million receivable for another transfer of land to the RLDC. In fact, the only land that Ramapo transferred to RLDC at that time was property donated for free for the baseball stadium, according to the commission.
Oberman also took part in inflating the town’s general fund by arranging $12.4 million in improper transfers from an ambulance fund over six years, the SEC said.
St. Lawrence misled a credit rating agency about the general fund balance before some of the bonds were rated. He later told other town officials to refinance the short-term debt as soon as possible, telling them “we’re all going to have to be magicians” to realize the inflated financial results, according to the SEC.
SEC charges are still pending against St. Lawrence who played the key role in the scheme to artificially inflate the balance of the town’s general fund in financial statements for fiscal years 2009 to 2014. He was convicted in a parallel criminal case last year and in December was sentenced to 30 in prison and to pay a $75,000 fine.
Michael Klein’s lawyer, Derrelle Janey of Gottlieb & Janey in New York, said Klein “is pleased with the agreement and looks
forward to moving on with the next chapter of his life.”
Klein had planned to resign on June 30, but may now do so as early as June 16 under the court order. Klein has worked for the town for 32 years, he said.
Counsel for Troodler – Michelle Ann Gitlitz of Blank Rome -- and Oberman – Gerard M. Damiani of the Law Office of Gerard M. Damiani -- didn't return calls for comment.