US - Five former San Diego city officials at the centre of the city's municipal bond offerings controversy have been charged with fraud by the Securities and Exchange Commission (SEC).
It claimed the defendants knew the city would face substantially higher pension and healthcare liabilities and would therefore be forced either to find new sources of revenue, lower obligations or cut other services.
It also alleged the city was aware pension obligations were set to rise from $284m in 2002 to £2bn by 2009, with an additional $1.1bn due in retiree healthcare costs, but filed deliberately misleading statements to keep these facts from investors when preparing for municipal bond sales in 2002-03.
Linda Chatman Thomsen, director, division of enforcement, SEC, said: "It is therefore imperative [municipal officials] honour the public's trust by ensuring that investors are provided with accurate, material information about the issuer's fiscal health."
The SEC previously sanctioned the city for this matter, which was settled when the municipal authority appointed an independent consultant for three years to ensure compliance with federal securities laws.
Rosalind Tyson, acting regional director, SEC Los Angeles regional office, added: "Despite knowing of the city's substantial pension and retiree health care liabilities, these five former San Diego officials failed to disclose what they knew to municipal securities investors.
"Their actions not only jeopardised the investors, but also compromised the interests of the city's citizens and its current and future retirees."
As Global Pensions previously reported (www.globalpensions.com; 12 December 2007), the SEC settled its case against former outside auditor Thomas J. Saiz, for writing "false and materially misleading" financial statements contained in the footnotes of the city's municipal bond offerings.
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