SEC Charges Town of Sterlington and Former Mayor Vern Breland with Municipal Bond Fraud
On June 2, 2022, the SEC issued a Cease-and-Desist for the town of Sterlington, Louisiana, alleging the town and former Mayor Vern Breland had defrauded municipal bond investors. Respondents also include Sterlington’s unregistered municipal advisor, Twin Spires Financial, and Twin Spires’ owner, Aaron Fletcher. They allegedly worked together to mislead investors in a $5 million municipal bond fraud.
Sterlington allegedly betrayed investors’ trust with their choice of financial advisor. In 2015, the town hired Twin Spires to advise on debt financing. During the relevant timeframe, Twin Spires Financial was not a registered advisor, and Sterlington should therefore have never employed its services.
Sterlington’s Alleged Municipal Bond Fraud
The bond offerings took place in 2017 and 2018. According to the SEC complaint, the town of Sterlington issued the revenue bonds to finance the development of a water system and improvements to the existing sewer system.
- April 2017: $4 million in Utility Revenue Bonds
- September 2018: $1.845 million in Wastewater, Water, and Sewer Treatment Utilities Revenue Bonds
Allegedly False Projections for the Number of Customers
Sterlington is a small town with approximately 2,600 citizens. Aaron Fletcher, Mayor Breland, and Twin Spires allegedly projected that the town would have 2,040 sewer customers in 2018. The SEC alleged that respondents knew that Sterlington only had 960 sewer customers in 2016. The SEC alleges Fletcher had no reasonable support for this projection.
Louisiana state law requires municipalities to apply to the Louisiana State Bond Commission (SBC) for approval. The SEC asserts that the SBC would not have approved the bond if they had submitted an accurate projection.
Misuse of Over $3 Million in Bond Investments
As one might expect, Mayor Breland did not disclose to investors that the SBC’s approval was based on allegedly false projections. Sterlington also did not disclose that Mayor Breland had allegedly directed the misuse of more than $3 million from earlier bond offerings intended for sewer system updates to instead cover improvements to a local sports complex, legal fees, and payroll.
LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit, said in a statement, “Investors in Sterlington’s bonds had a right to know that the town had obtained approval of the bond offerings based on false projections and had misused proceeds from prior offerings. Further, it is long past time for financial advisors to municipal issuers to comply with the requirement that they must be registered with the Commission before they provide municipal advice, and we will vigorously pursue advisors who continue to flout those requirements.”
More Charges for Former Mayor Vern Breland
Vern Breland resigned from his mayoral position in 2018. In 2020, Breland was charged with criminal malfeasance.
Bonds Investment Fraud
Municipal bonds with a good rating are generally considered reliable, low-risk investments. Brokers allegedly sold these bonds to investors as private placements, which can be high risk. If your broker sold you a private placement, they should have communicated the increased risks.
And if you lost money on any security you believed to be a safe investment, contact one of our experienced investment lawyers for a free case evaluation. Call (877) 600-0098 or email email@example.com.