West Clark Community Schools, Ind., charged for false statements about financial disclosures

By Toni Weeks

San Luis Obispo, Calif., July 29 - The Securities and Exchange Commission has charged West Clark Community Schools, Ind., and its municipal bond underwriter for false statements as to the disclosure of annual financial information.

An SEC investigation revealed that in an official statement prepared in 2007 for a $32 million bond offering, the school district stated that it was in compliance with its disclosure obligations related to prior bond offerings. The SEC found, however, that the district had not submitted required annual reports or notices for a $52 million 2005 bond offering, and the underwriter, City Securities Corp., did not conduct adequate due diligence to detect the false statement.

The SEC has also charged Randy G. Ruhl, the head of the public finance and municipal bond department at City Securities, for misconduct involving West Clark's disclosures.

The SEC found that City Securities and Ruhl provided improper gifts and gratuities to representatives of municipal bond issuers and then charged these and other expenses back to the issuers under the category of costs for printing, preparation and distribution of official statements. According to a press release, the gifts included multi-day golf trips and tickets to various sporting events.

City Securities has agreed to pay nearly $580,000 to settle the SEC's charges. Ruhl and West Clark have also agreed to settlements, which include a one-year collateral bar and a permanent supervisory bar for Ruhl.

"This is the first time the SEC has charged a municipal issuer with falsely claiming in a bond offering's official statement that it was fully compliant with the annual disclosure obligations it agreed to in prior offerings and an underwriter and its principal for not doing the necessary research to attest to the truthfulness of that claim," said Andrew Ceresney, co-director of the division of enforcement. "This case demonstrates that we will be vigilant in making sure municipal issuers and underwriters comply with their obligations."

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