SEC Accuses New Jersey Firm, 4 Men of Municipal Bond Fraud

The Securities and Exchange Commission filed civil fraud charges Thursday against a New Jersey company and four individuals, one a former top aide to ex-New Jersey Gov. James J. Florio, alleging they were involved in a kickback scheme to win a lucrative 1990 municipal bond deal.

The case has received national attention and sparked numerous efforts to clean up political influence in the $1.2-trillion municipal securities market, which plays a key role in financing the construction of schools, bridges, roads and other public projects.

Richard Walker, New York regional director for the SEC, said the four people named in the civil complaint, filed in U.S. District Court in Manhattan, are Joseph C. Salema, Florio’s former chief of staff; Nicholas A. Rudi, former administrator of Camden County, N.J., and Alexander S. Williams and George L. Tuttle Jr., two former executives with First Fidelity Bank of Newark, N.J.

The U.S. attorney’s office was expected to separately announce criminal charges related to the case, Walker said. Details were not immediately available, but one source familiar with the case, who spoke on the condition of anonymity, said indictments are expected.

Walker said all but Rudi have settled civil charges with the SEC and agreed to surrender a total of $348,000 in money acquired improperly in the New Jersey bond scheme, which took place in 1990.

“The complaint alleges that Rudi and Salema were perceived to be influential and able to steer municipal securities business to underwriters as a result of their political contacts in Camden County,” Walker said.

In the SEC civil case, the men are charged with violating federal laws on fraud, municipal securities, and books and records. In settling with the SEC, Tuttle, Williams and Salema agreed they would not violate securities laws in the future.

Also named in the case by the SEC was Public Capital Advisors Inc., a financial advisory firm formerly known as Consolidated Financial Management Inc. The firm had been owned by Salema and Rudi.

The SEC case describes “an elaborate kickback scheme” in which payments were allegedly funneled through First Fidelity to Rudi and Salema to obtain the state’s underwriting business, Walker said.

Federal authorities accused the two Fidelity bankers, Tuttle and Williams, of failing to properly disclose fees paid to Salema and Rudi.

Salema and Rudi allegedly steered to the bankers a $237-million municipal bond offering by the Camden County Municipal Utilities Authority in February, 1990.

First Fidelity was the lead underwriter for the deal, and Consolidated Financial Management was the financial adviser.