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The Daily

SEC Says Ramapo, NY Officials Cooked Books to Charm Bond Investors

Chris Gaetano
Published Date:
Apr 14, 2016
SECURITIES-AND-EXCHANGE-COMMISSION-facebookThe Securities and Exchange Commission has accused officials in Ramapo, NY of hiding the town's rapidly deteriorating financial situation from its municipal bond investors.

The SEC said that the cost of building a $60 million baseball stadium, combined with falling revenues from sales and property taxes, caused the town severe financial stress. Rather than admit this, however, Christopher P. St. Lawrence, the president of the Ramapo Local Development Corp., decided instead to inflate the general fund balance on its financial statements for fiscal years 2009 to 2014, said the SEC.

While the town actually had a balance deficit as high as $14 million, bond investors were told that the fund had a positive balance between $1.4 million and $4.2 million over the six year period. Further, Aaron Troodler, RLDC executive director and assistant town attorney, is said by the SEC to have masked a shortfall in operating revenue at the RLDC. Through this, investors were unaware the town would likely need to subsidize those bond payments and further deplete its general fund.

Both St. Lawrence and Troodler, in addition to the SEC complaint, are also facing criminal charges from the U.S. Attorney’s Office for the Southern District of New York. 

“Retail investors account for more than 75 percent of the $3.7 trillion municipal bond market, which is critical for our nation’s infrastructure and development,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “We won’t stand for public officials and employees who resort to alleged accounting trickery to mislead investors who are investing in their financial futures as well as the future betterment of our communities.”

The town's 2014 audit noted the SEC and FBI investigation in an emphasis of matter paragraph but otherwise agreed that the statement fairly represented the government's activities and changes in financial position.

A 2012 audit by the State Comptroller's office was critical of the town's financial management, particularly surrounding the baseball stadium. It faulted the town for being too intermingled with the RLDC, which caused it to circumvent controls for the approval and construction of projects like the stadium.

It also said that the board never received any financial reports for the stadium project (or any other municipal project for that matter), and so never knew how much it would cost taxpayers or how it would be paid for. The comptroller's report also said that Ramapo had depleted its balances in three major operating funds because of unrealistic revenue estimates. 

It concluded that, given the loans the RLDC has needed to take out to fund the stadium construction, "it is unlikely that the RLDC will be able to reimburse the Town for the full principal and interest payments made on the $25 million bonds."