SEC accuses the City of Rochester and former city and school executives of misleading investors
The U.S. Securities and Exchange Commission has charged the City of Rochester, its former finance director Rosiland Brooks-Harris, and former Rochester City School District CFO Everton Sewell with misleading investors in a $119 million bond offering.
The SEC also charged Rochester’s municipal advisor, Capital Markets Advisors with misleading investors.
The SEC alleges that in 2019, the defendants misled investors with bond offering documents that included outdated financial statements for the school district and did not indicate that RCSD was “experiencing financial distress due to overspending on teacher salaries.”
The federal agency’s complaint accuses the defendants of violating the antifraud provisions of the securities laws. The SEC is seeking “injunctive relief and financial remedies” against all of the parties involved.
The commission did say that Sewell agreed to settle the SEC’s charges by consenting, without admitting or denying any findings, to a court order prohibiting him from future violations of antifraud provisions and from participating in future municipal offerings and to pay a $25,000 penalty.
The chief of the SEC’s Enforcement Division’s Public Finance Abuse Unit, LeeAnn Ghazil Gaunt, said that the commission alleges that the city school district’s financial health was important to investors, who were counting on the district as the expected source of repayment.
Ghazil Gaunt added that, “as described in our complaint, these defendants failed to inform investors of the serious financial difficulties the district was experiencing at the time of the offering.”
On Tuesday evening, the City of Rochester issued this response:
"We are surprised and dismayed that the SEC has chosen to take this unwarranted action. We have made it clear that the City does not have access to or authority over the finances of the Rochester City School District, and therefore cannot be responsible for the District withholding financial information.
This action relates to an investigation the SEC initiated in 2019. The City of Rochester was forthcoming throughout that investigation, and has always behaved responsibly and appropriately regarding disclosure of City finances.
We disagree vehemently with this filing and will take all appropriate legal steps to defend the City and its former financial director in this matter."