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RCSD under federal investigation from SEC

James Brown
WXXI News file photo

The city of Rochester received a subpoena from the Securities and Exchange Commission last week as part of an investigation into the Rochester City School District. 

The inquiry was spurred by a budget presented by the district’s former Chief Financial Officer Everton Sewell last spring. That budget was used by the city to borrow about $50 million in government bonds to cover the district’s payroll and expenses, which is typical. What was not typical, is that budget was an estimated $30 million in the red and Sewell didn’t tell anyone about it. Sewell resigned before a board meeting in October. Earlier this month, Superintendent Terry Dade told WXXI News that the shortfall is now an estimated $64.8 million.

A statement from the city corporation counsel Tim Curtin called this “a serious matter” that will affect city residents and taxpayers. He also notes that the district is “ultimately responsible for its own management and finances.” 

Board of Education President Van White anticipates that some district employees will be asked to provide documents and interviews to the SEC. He said the district will be open and transparent and will approach it the way they’ve approached the state comptroller’s audit which has been ongoing since October. White believes the investigation is unlikely to touch anyone near a classroom.

“I don’t expect that their lives are going to impacted at all by this. Quite frankly, this is just another level of government doing its job. But the job that they’re doing has nothing to do with instruction,” said White 

To close the gap the district is instituting cost controls, cutting programs and appealing to the state for more money. They’re also planning to lay off more than 200 teachers, staff and administrators mid-year. The notices for those cuts are expected to go out on December 4th.

Curtin's full statement is below: 

“As I anticipated, having spent an entire legal career as Bond Counsel, the SEC has issued a subpoena requesting information related to the RCSD finances and the RAN that the City issued on behalf of the RCSD. It is important to note that the RCSD is a separate corporate entity ultimately responsible for its own management and finances. The City will comply with this subpoena and fully cooperate with the SEC’s investigation into the RCSD financial situation.  The RAN that was issued was based on information for investors prepared and provided solely by RCSD. However, as the Mayor noted when the City was first notified by school board President White that the RCSD had overspent its budget, this is a serious matter and the ongoing financial challenges at RCSD impact the City, its taxpayers, and most importantly our children. Therefore, we will continue to work with all involved to ensure the best possible outcome for our entire community."

James Brown is a reporter with WXXI News. James previously spent a decade in marketing communications, while freelance writing for CITY Newspaper. While at CITY, his reporting focused primarily on arts and entertainment.
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