OREANDA-NEWS. April 15, 2016. The Securities and Exchange Commission today announced fraud charges against Ramapo, N.Y., its local development corporation, and four town officials who allegedly hid a deteriorating financial situation from their municipal bond investors.

The SEC alleges that Ramapo officials resorted to fraud to hide the strain in the town’s finances caused by the approximately \\$60 million cost to build a baseball stadium as well as the town’s declining sales and property tax revenues.  They cooked the books of the town’s primary operating fund to falsely depict positive balances between \\$1.4 million and \\$4.2 million during a six-year period when the town had actually accumulated balance deficits as high as nearly \\$14 million.  And because the stadium bonds issued by the Ramapo Local Development Corp. (RLDC) were guaranteed by the town, certain officials also masked an operating revenue shortfall at the RLDC and investors were unaware the town would likely need to subsidize those bond payments and further deplete its general fund.

According to the SEC’s complaint, inflated general fund balances were used in offering materials for 16 municipal bond offerings by Ramapo or the RLDC to investors, who consider the condition of a municipality’s general fund when making investment decisions.  After town supervisor Christopher P. St. Lawrence purposely misled a credit rating agency about the town’s general fund balance before certain bonds were rated, he told other town officials to refinance the short-term debt as fast as possible because “we’re going to all have to be magicians” to realize the purported financial results.

“Retail investors account for more than 75 percent of the \\$3.7 trillion municipal bond market, which is critical for our nation’s infrastructure and development,” said Andrew J. Ceresney, Director of the SEC Enforcement Division.  “We won’t stand for public officials and employees who resort to alleged accounting trickery to mislead investors who are investing in their financial futures as well as the future betterment of our communities.”

According to the SEC’s complaint:

  • Christopher P. St. Lawrence, who served as RLDC’s president in addition to being town supervisor, masterminded the scheme to artificially inflate the balance of the general fund in financial statements for fiscal years 2009 to 2014. 
  • St. Lawrence and Aaron Troodler, a former RLDC executive director and assistant town attorney, concealed from investors that RLDC’s operating revenues were insufficient to cover debt service on bonds to finance the stadium.
  • Town attorney Michael Klein helped conceal outstanding liabilities related to the baseball stadium and repeatedly misled the town’s auditors about the collection of a \\$3.08 million receivable recorded in the town’s general fund for the sale of a 13.7-acre parcel of land to the RLDC.  But because the title of the property was never transferred from the town to the RLDC, Klein also made misleading statements about the receivable’s source.
  • Troodler helped conceal the fictitious sale and boost the account balance of the town’s general fund by approving RLDC financial statements reflecting a purchase of property that never actually occurred.  Troodler also signed offering documents that contained an additional fabricated receivable totaling \\$3.66 million for another transfer of land from the town to the RLDC.  The only land transferred from the town to the RLDC during the time of the purported transaction was property donated for the baseball stadium, which St. Lawrence and Troodler knew did not impose any payment obligation on the RLDC.
  • The town’s deputy finance director Nathan Oberman participated in activities to inflate the town’s general fund by arranging \\$12.4 million in improper transfers from an ambulance fund to bolster the troubled general fund during a six-year period.


In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against St. Lawrence and Troodler.

“We allege that Ramapo’s senior-most officials concealed the true condition of the town’s declining finances to avoid further political fallout from the construction of the baseball stadium,” said LeeAnn Ghazil Gaunt, Chief of the SEC Enforcement Division’s Public Finance Abuse Unit, which was previously known as the Municipal Securities and Public Pensions Unit.

The SEC’s complaint charges Ramapo, RLDC, St. Lawrence, Troodler, Klein, and Oberman with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.  St. Lawrence and Troodler also are charged with liability under Section 20(a) of the Exchange Act as controlling persons for the violations by the town and RLDC, and all four town officials are charged with aiding and abetting violations by the town and RLDC.  In addition to financial penalties, the SEC seeks a court order appointing an independent consultant for Ramapo and RLDC to recommend improvements for financial reporting and municipal securities disclosure policies and monitor the mandated implementation of those recommendations for a period of five years.  The SEC also seeks an order prohibiting the town officials from participating in future municipal bond offerings.

The SEC’s continuing investigation is being conducted by Daniel M. Loss and Celeste A. Chase of the New York office and Creighton L. Papier of the Public Finance Abuse Unit with assistance from Jonathan Wilcox, Louis Randazzo and Mark R. Zehner from the Public Finance Abuse Unit.  The SEC’s litigation will be led by Alexander M. Vasilescu and Mr. Loss.  The case is being supervised by Sanjay Wadhwa and Ms. Gaunt.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the Rockland County District Attorney’s Office in New York.