Former Head of Pacific Genesis to Settle Fraud Charges
David Fitzgerald, former head of underwriter Pacific Genesis Group Inc., has agreed to pay $300,000 to settle securities fraud charges concerning municipal bond sales for a Southern California housing development, a lawyer for the Securities and Exchange Commission said.
The SEC in December 2000 sued Fitzgerald and Alameda, Calif.-based Pacific Genesis, charging they misled investors with an inflated appraisal and other improper disclosures in selling about $70 million of bonds for the project.
Under the settlement, Fitzgerald is barred for five years from working with brokerage firms, said James Howell, an SEC trial attorney in San Francisco who handled the case.
U.S. District Judge Charles Breyer of San Francisco still “has to sign off” on the proposed settlement, Howell said. The parties all have agreed to the terms, including Pacific Genesis, he said.
The bonds were sold in eight offerings from 1996 to 2000 for a 1,375-acre development known as Rancho Lucerne, which is on the edge of the Mojave Desert northeast of Los Angeles.
Pacific Genesis also sold other municipal bonds for proposed real estate projects throughout California.
Fitzgerald will pay a $55,000 civil penalty for the Rancho Lucerne deals and disgorge an additional $245,000 in gains, including about $30,000 in interest, according to documents filed with Breyer. Alvin Fishman, a lawyer for Fitzgerald, couldn’t be reached to comment.
The bonds generated controversy from the time they were first sold, in part because the financing authorities used to offer the debt didn’t include local government oversight. The state attorney general and treasurer scrutinized the transactions, and Gov. Gray Davis in 2000 signed a law giving the state more power to monitor tax-exempt bonds sold for speculative real estate development.
The California Department of Corporations in June banned Pacific Genesis from doing business in the state, saying it violated an earlier order to improve securities disclosure.
