Risk & Compliance

N.Y. Town Officials Accused of Bond Fraud

Prosecutors say it is the first criminal case to allege accounting fraud against city officials in connection with the sale of municipal bonds.
Matthew HellerApril 15, 2016

The deputy finance director of Ramapo, N.Y., and three other town officials “cooked the books” of the New York suburb to hide the true state of its finances from municipal bond investors, federal authorities have alleged.

The U.S. Securities and Exchange Commission said the officials resorted to accounting fraud as a result of the significant financial strain from a controversial baseball stadium project, falsely depicting positive general fund balances between $1.4 million and $4.2 million during a six-year period when the town actually accumulated deficits as high as nearly $14 million.

From 2010 to 2015, the SEC said on Thursday, Ramapo raised more than $300 million, about $85 million of it new money, from bond investors on the basis of materially false representations.

The SEC alleged town supervisor Christopher St. Lawrence was the mastermind of the scheme. Aaron Troodler, the former executive director of the Ramapo Local Development Corp., town attorney Michael Klein, and deputy finance director Nathan Oberman are also named as defendants in the SEC’s civil complaint.

St. Lawrence, 65, and Troodler, 42, were also charged Thursday in a parallel criminal fraud case. Prosecutors believe it is the first such case brought against city officials in connection with the sale of municipal bonds.

“The $3.7 trillion municipal bond market is no place for fraud and manipulation; there should be no tolerance for it,” Manhattan U.S. Attorney Preet Bharara said in a news release. “Whether you are a publicly listed company or a municipality, you are not allowed to cook the books, plain and simple.”

The charges were filed nearly three years after FBI agents and other investigators seized boxes of documents and computer hard drives from Ramapo’s municipal offices. Bharara said a whistleblower “got the ball rolling in a significant way.” He did not name former Ramapo finance official Melissa Reimer, but according to the Lower Hudson Valley Journal News, she recorded conversations with St. Lawrence, Klein, and other officials.

Oberman, 87, allegedly engaged in accounting fraud by, among other things, directing improper transfers from the ambulance fund to the general fund totaling $12.4 million.

“We won’t stand for public officials and employees who resort to alleged accounting trickery to mislead investors who are investing in their financial futures as well as the future betterment of our communities,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division.