Five things you ought to know about Harrisburg securities fraud charges

HARRISBURG PATRIOT-NEWS:   …Apart from yet another public relations embarrassment, not much. The charges were filed simultaneous to the sentence, as it were: an agreement has already been worked out between the city and the SEC. The city will not be assessed any fines – not that it could pay them if it were. The city already is unable to borrow any money, so it’s not like the bad publicity is going to hurt its position in the markets. No one is going to jail – or even criminal court – as a result, so there’s likely to be a good deal of general grousing about ineffective government on the federal as well as the local level. Nothing new there either, really.

For starters, the city’s on notice not to do it again. The “cease and desist” order from the SEC is forward looking, so if it happens again, it’s less likely to result in a slap on the wrist. More to the point, the city has already adopted policies (where none existed before) ensuring not only that required filings will be made, but that one named person shall be in charge and that person shall file official notice to the Mayor, City Council and other city officials that filings have indeed been made. That puts named people – many of them elected – on the hook and liable, ensuring a more effective system of checks and balances than ever existed before. There will also be annual training on the city’s reporting requirements.

The SEC’s action on Monday was less about punishing Harrisburg than it was about putting municipal officials across the country on notice. It was a first-of-its-kind action that made it clear that officials in municipalities with bond debt are and will be liable for what they say about the financial health of their town – especially if the town has failed to file its required documents with the SEC….  (more)