SEC charges former Mamtek CEO with fraud in municipal bonds sale

By Susanna Moon

Chicago, Sept. 18 - The Securities and Exchange Commission said it charged Bruce Cole, the former chief executive officer and chairman of Mamtek U.S., with fraud related to the offer and sale of municipal bonds.

The suit was filed in the U.S. District Court for the Central District of California, according to an SEC press release.

The SEC's complaint alleges that Cole executed a scheme to defraud investors and made material misrepresentations and omissions in connection with the July 2010 offer and sale of $39 million of appropriations credit bonds backed by the city of Moberly, Mo.

The bond offering was intended to finance a sucralose processing plant in Moberly that Mamtek would construct and operate, the release noted.

The SEC said it alleges that Cole executed his fraud by directing unsuspecting Mamtek employees to take actions that diverted more than $900,000 of bond proceeds for his and his wife's personal use and by misleading city officials and bondholders about the use of those proceeds.

Prior to the close of the bond offering, Cole allegedly directed Mamtek employees and consultants to create false documentation for a nonexistent company to falsely justify fictitious expenses for the sucralose project, the SEC said.

He then supposedly instructed Mamtek employees to wire his wife, Nanette H. Cole, $900,000 of bond proceeds, which were used to pay their mortgage, credit card debt, homeowners and auto insurance, and household employees, under the false pretense that she was an agent of the sham company, the release continued.

As a precondition to the issuance of the bonds, Cole signed a certificate representing certain portions of the official statement delivered to bondholders for the $39 million offering were not false or misleading. However, at the time that Cole signed the document, he had already directed the creation of the false documentation and had made preliminary plans to divert and misuse the bond proceeds, rendering his representation in the closing certificate false.

In doing so, he misrepresented the use of bond proceeds and the accuracy of the official statement, according to the release.

Through its complaint, the commission seeks a permanent injunction, disgorgement with prejudgment interest and a civil penalty. The commission also names Nanette Cole as a relief defendant because she obtained the bond proceeds from her husband and seeks return of those funds.

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