Charges Brought for Muni-Bond Fraud; Offering Halted; Settlement and default judgment obtained

Defendant City and its comptroller were charged with materially deceiving investors in municipal bond offerings. At least $1.7 million of investment funds that were supposed to be used to develop and construct a Holiday Inn was allegedly diverted to fund the city’s payroll and other operational costs. A similarly deficient additional offering was halted by the SEC’s quick action in this case. Ultimately, the case was settled as against the City with injunctions and required remedial undertakings. Defendant Letke (who was alleged to have personally profited from the fraudulent offerings) failed to respond to the complaint and was found in default.