News and Tribune

July 29, 2013

West Clark settles in bond accusations

Securities and Exchange Commission claims bond investors defrauded

By JEROD CLAPP
jerod.clapp@newsandtribune.com

CLARK COUNTY — Accusations regarding false statements to bond investors from the U.S. Securities and Exchange Commission were announced against West Clark Community Schools and its bond underwriter on Monday.

According to a news release, the commission alleged the district and its underwriter, Indianapolis-based City Securities Corporation, didn’t provide required annual finances and notices to bond investors for a $31 million bond offering in 2007. Both parties settled with the commission.

Though the district was accused of defrauding investors, Michael Gillenwater, the district’s attorney, said West Clark’s board of trustees was under the impression that City Securities was handling the proper paperwork before soliciting the bonds.

“We were being told it was OK to sign these things,” Gillenwater said. “These are the guys who are dealing with our bond issues for this and we paid them a lot of money to do this. You’d think you can trust them to do this kind of stuff. But apparently, they make mistakes, too.”

Though the board has knowledge in raising funds for various projects in the district, Gillenwater said they need to look for outside help in complicated legal matters.

“We have to rely on experts when we’re complying with securities laws,” Gillenwater said. “I’ve got board members who are laypeople. I’m a lawyer and I know some things, but I’m not going to pull out a securities book because that’s a whole different animal.”

The district’s board signed off on a statement for the 2007 bond that they submitted annual reports for a $52 million bond in 2005, but the commission found those reports never made it to the Nationally Recognized Municipal Securities Information Repositories.

Gillenwater said the district was under the impression they were paying City Securities to handle those reports, but learned later they weren’t. He said that was a miscommunication between the district and the company.

But while the district was only required to put together the missing reports and submit them properly, City Securities settled with the commission by paying $580,000.

Neither party confirmed nor denied the accusations.

Gillenwater said the district didn’t intentionally mislead anyone or wrongly take money.

“Nobody was being snookered here,” Gillenwater said. “For us it was a technical error, not a misrepresentation that was intentionally done.”