The SEC & Harrisburg: A sad fraud
Long our Commonwealth of Corruption's nexus, Harrisburg has settled a first-of-its-kind Securities and Exchange Commission fraud case based on former Mayor Stephen R. Reed's administration misleading investors.
Required financial filings for 2007 omitted $4 million paid to guarantee bond debt related to a municipal-incinerator boondoggle that drained city coffers. A 2008 filing claimed “a high degree of uncertainty” about the city's incinerator authority making debt-service payments — when Harrisburg knew those payments couldn't be made for 2009 and later.
After that, Harrisburg stopped filing required documents with the SEC. That left investors looking to the 2009 city budget, which portrayed Harrisburg's credit rating as higher than it was, and Mr. Reed's 2009 “State of the City” address. He knew — but didn't mention — that the city likely was on the hook for $260 million total, instead discussing an “additional challenge” that could be “resolved.”
Mayoral successor Linda Thompson's administration was cited for additional filing failures. It cooperated with the SEC probe and has implemented reforms; she's pleased that the settlement precludes further litigation or fines.
But it doesn't preclude criminal prosecution, which is needed to deter further public corruption — and to reinforce what's widely seen as the settlement's broader purpose:
Putting municipal officials nationwide on notice about making statements that amount to securities fraud.
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