The SEC has filed securities fraud charges against the city of Victorville, CA, one of the city’s officials, the Southern California Logistics Airport Authority, and Kinsell, Newcomb & DeDios, which underwrote the bonds. The SEC claims that they bilked investors by inflating valuations of property that secured a 2008 municipal bond offering.
According to the regulator, city official Keith C. Metzler and KND owner Jeffrey Kinsell and VP Janees L. Williams are to blame for misleading and false statements put out in the Airport Authority’s bond offering in April 2008. The SEC is also accusing KND of misusing over $2.7 million in bond proceeds to stay in business.
The Commission says that the Airport Authority took on a number of redevelopment projects and financed them by putting out tax increment bonds, and by April 2008 it had to issue even more bonds to refinance a portion of the debt incurred to keep going with these endeavors.
The principal amount of the new bond put out was based in part on Williams, Kinsell, and Metzler using a $65 million valuation for one of the projects, which involved the construction of airplane hangers (even though they were aware that the county assessor placed a value on the hangers that was less than 50% of that amount.) The inflated figure, however, let the airport authority put out more bonds and raise additional funds. The SEC says this led to investors being given the false information about the value of the security that was there to pay them back.
The regulator believes that the Airport Authority lent KND Affiliates, also owned by Kinsell, over $60 million in bond proceeds for the hangar project and agreed to compensate the latter with a construction management fee that was comprised of 2% of cost that was left on construction. KND Affiliates and Kinsell also allegedly took about $450,000 in fees that weren’t authorized, as well as $2.3 million in fees that the Airport Authority not only didn’t agree to but also never knew about, supposedly as compensation for managing the hangers. (The SEC believes that KND Affiliates and Kinsell concealed these fees not just from the Airport Authority but also from auditors.)
The SEC wants ill-gotten gains (along with prejudgment interest) returned, permanent injunctions, and financial penalties.
If you suspect that your institution is the victim of municipal bond fraud, do not hesitate to email or call please contact The Resolution Law Group at (203) 542-7275 for a confidential, no obligation consultation. Our municipal bond fraud attorneys are here to help institutional investors recoup losses that are a result of a financial scam or negligence. Your consultation with us is free.
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