By Nate Raymond and Zachary Fagenson
(Reuters) - The city of Miami on Friday lost its bid to dismiss a lawsuit by the U.S. Securities and Exchange Commission that accused the city of fraud by making misleading statements and omissions in connection with municipal bond offerings.
U.S. District Judge Cecilia Altonaga in Miami, Florida, said she was not convinced the SEC's complaint was a "shotgun pleading," rejecting the city's claims the agency failed to allege any false or misleading statement.
"Those general allegations support each claim for relief and identify the relevant events, misrepresentations, and omissions advanced by the SEC," Altonaga wrote.
The judge also rejected arguments the SEC failed to show that any of the alleged misstatements or omissions were material to investors, saying there was "just enough" to prevent such a finding.
Miami Mayor Tomas Regalado in an interview said the city "sort of expected this ruling." He promised to continue litigating, but also said Miami was willing to settle the case.
"What I hope is that we can get a settlement that would not affect the positive outlook that we have in the bond offerings of the city now," he said.
In a separate ruling Friday, Altonaga also declined to dismiss the SEC's fraud claims against Michael Boudreaux, a former budget director for the city. Boudreaux had contended that as a public official he had qualified immunity from civil liability.
Benedict Kuehne, a lawyer for Boudreaux, said in an email that his client "remains confident that his hard work will be recognized as being without fault, no matter the extraordinary level of scrutiny exercised by the SEC."
Representatives for the SEC did not respond to a request for comment.
The SEC sued Miami and Boudreaux in July amid a crackdown by the agency on issuers in the $3.7 trillion municipal bond market for failing to provide investors accurate and timely information.
The lawsuit said that beginning in 2008, Miami and Boudreaux made misleading statements about interfund transfers in three 2009 bond offerings for $153.5 million.
The SEC also accused the administration of the city, which has a population of 414,000 people, of violating a 2003 cease-and-desist order entered into to with the agency over similar misconduct.
Since the SEC filed the lawsuit in July, the city hired a new budget director, and a trio of top finance staff resigned in late August. In response to the allegation, the city has also offered to bring in a new finance team under a revamped structure.
The city is also under SEC investigation in a probe focused on $500 million in bonds that the city and county sold to pay for the Marlins' new baseball park in Little Havana.
The lawsuit came two months after the SEC similarly sued South Miami for fraud, saying it did not disclose issues with the tax-exempt status of two bond deals.
It was one of a number of actions the SEC has taken this year against municipal issuers.
In May, the SEC brought a landmark case accusing Pennsylvania's capital city of Harrisburg of making misleading statements outside of disclosure documents.
A month earlier, it accused Victorville, California, and others of defrauded investors by inflating the value of property used to secure a 2008 bond sale.
The SEC in March settled securities fraud claims against Illinois for misleading investors about its pension problems.
Most recently, the SEC announced in November a $20,000 settlement with the Greater Wenatchee Regional Events Center Public Facilities District, a municipal corporation formed by nine cities in Washington state.
The settlement, which resolved claims it misled investors in a bond offering financing an events center and hockey arena, was the first time the SEC had assessed a financial penalty against a municipal issuer.
The case is Securities and Exchange Commission v. City of Miami, Florida, U.S. District Court, Southern District of Florida, No. 13-22600.
Our 2024 Coverage Needs You
It's Another Trump-Biden Showdown — And We Need Your Help
The Future Of Democracy Is At Stake
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
The 2024 election is heating up, and women's rights, health care, voting rights, and the very future of democracy are all at stake. Donald Trump will face Joe Biden in the most consequential vote of our time. And HuffPost will be there, covering every twist and turn. America's future hangs in the balance. Would you consider contributing to support our journalism and keep it free for all during this critical season?
HuffPost believes news should be accessible to everyone, regardless of their ability to pay for it. We rely on readers like you to help fund our work. Any contribution you can make — even as little as $2 — goes directly toward supporting the impactful journalism that we will continue to produce this year. Thank you for being part of our story.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
It's official: Donald Trump will face Joe Biden this fall in the presidential election. As we face the most consequential presidential election of our time, HuffPost is committed to bringing you up-to-date, accurate news about the 2024 race. While other outlets have retreated behind paywalls, you can trust our news will stay free.
But we can't do it without your help. Reader funding is one of the key ways we support our newsroom. Would you consider making a donation to help fund our news during this critical time? Your contributions are vital to supporting a free press.
Contribute as little as $2 to keep our journalism free and accessible to all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you'll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.