SEC Probe of Muni Bond Issues Sought
In an usual move, state Treasurer Matt Fong has called on the U.S. Securities and Exchange Commission to investigate the legality of several municipal bond issues, including millions of dollars in bonds sold for a project in Calabasas and others sold by a Palm Springs Native American tribe.
The move is part of an increased vigilance of the municipal bond industry on the part of Fong and other state and federal officials in the wake of Orange County’s bankruptcy filing in 1994.
In a Sept. 10 letter to SEC Chairman Arthur Levitt, Fong says nine recent bond deals in California underwritten by the firm Pacific Genesis Group were sold to hundreds of investors “in violation of state laws for essentially private purposes associated with land development projects.” Calls to the firm Wednesday went unanswered.
The bond deals “violated the letter and spirit” of state law and “also threaten the municipal securities market in general,” Fong said.
The deals include $6.1 million in bonds sold by the Malibu Canyon Public Financing Authority to buy 100 acres for open space as part of the 207.5-acre residential and retail project called Calabasas Center and a $10-million bond issue sold by the California Desert Public Financing Authority, which includes the Shoalwater Bay Indian Tribe, to acquire 160 acres for a golf course and 160 acres for open space.
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