New York – U.S. Attorney Preet Bharara had harsh words for Town of Ramapo Supervisor Christopher St. Lawrence and Aaron Troodler, former assistant attorney for the Town of Ramapo and executive director of the Ramapo Local Development Corporation, charging the pair with 22 counts of fraud and conspiracy in connection with municipal bonds issued by the town and the RLDC to finance the construction of a minor league baseball stadium in Ramapo.
The arrest of the two men was the culmination of a joint effort between the U.S. Attorney’s office, the FBI, the Securities and Exchange Commission and the Rockland County District Attorney’s office.
In his remarks at a press conference this morning in Manhattan, Bharara described the case as what is believed to be the first time that a public official has ever been charged with municipal bond related securities fraud.
“As alleged, Christopher St. Lawrence and N. Aaron Troodler kicked truth and transparency to the curb, selling over $150 million of municipal bonds on fabricated financials,” announced Bharara. “In doing so they defrauded both the citizens of Ramapo and thousands of municipal bond investors around the country.”
Bharara further admonished the two men saying, “You are not allowed to cook the books, plain and simple.
And whether you are a state legislator responsible for enacting laws or a municipal executive responsible for a town’s finances, you must be accountable.
You must be accountable to the public and you must be accountable to the truth.”
The indictment unsealed today alleges that St. Lawrence repeatedly padded the numbers of the town’s primary operating fund, known as the General fund, which is reserved for emergency usage and also serves as a primary indicator of the town’s financial health.
St. Lawrence and Troodler overstated the balance in Ramapo’s General fund when the RLDC issued $25 million in bonds to build Provident Bank Park in 2011, deliberately giving investors the impression that the town had the assets to guarantee both the payments and the interest on the bonds, when in fact the General fund actually had a negative balance.
As of August 2015, the Town of Ramapo had over $128 million in outstanding bonds issued for several municipal projects, which included the stadium bonds.
While some of the town’s outstanding debt was caused by St. Lawrence falsifying the balance of the General fund in numerous instances dating back as far as 2009 and precedes the construction of Provident Bank Park, much of the town’s shortfall is a direct result of the $58 million cost of the stadium project.
The indictment also alleges that St. Lawrence and Troodler told investors that revenue from the stadium and sales at an associated condominium were being used to make payments on the bonds that were issued.
Those statements were designed to give the impression that as the guarantor, the town would not be responsible for the $25 million in bonds and also served to minimize the perceived risk associated with the RLDC bonds. In fact, those bond payments were being made either with money from the Town of Ramapo’s coffers or money that had been borrowed from the bank.
Both St. Lawrence and Troodler, who has since moved from Spring Valley to Bala Cynwyd, Pennsylvania, have been charged with eight counts of securities fraud, 13 counts of wire fraud and one count of conspiracy. Each of the securities and wire fraud charges, carries a maximum sentence of 20 years in prison.
The conspiracy charge carries a maximum prison sentence of five years.
The Securities and Exchange Commission levied charges of its own against St. Lawrence, Troodler, Ramapo town attorney Michael Klein and Ramapo deputy finance director Nathan Oberman in a civil action today at the U.S. District Court in White Plains.
A complaint filed by the SEC named St. Lawrence as the mastermind of a scheme to cook the Towns books and said that Troodler hid the fact that the RDLC could not cover its payment on the stadium bonds from investors.
The complaint charged Klein with misleading town auditors about the collection of a $3.08 million receivable that had been recorded in the town’s general fund and said that Oberman played a part in inflating the town’s general fund balance over a six year period, arranging $12.4 million in improper transfers from an ambulance fund.
“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.”
In a statement released today, Ramapo’s deputy supervisor Patrick Withers described the nature and extent of the charges as “shocking.”
“Every public official has a sacred responsibility to conduct themselves well within the confines of our laws,” said Withers. “The charges unveiled today shake the foundation of that principle and the faith of the people of Ramapo.
While I believe in the presumption of innocence for all until their guilt is proven, I know that what is right for the Town of Ramapo requires that difficult decisions must be made in the coming days.”