The U. S. Securities and Exchange Commission (SEC) recently filed charges against Randall J. Miller, his son Chad J. Miller, and an associate Jeffrey De Laveaga, all residents of Maricopa County, Arizona, with a fraudulent $284 million bond offering scheme to finance a sports complex in Mesa Arizona.
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, charges defendants with violating certain of the anti-fraud provisions of the federal securities laws, to wit: Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
The SEC complaint alleges that Randy Miller attempted for several years to develop other sports parks concepts by seeking private loans or investor funding. After failing to attract sufficient funds, he began to pursue the use of municipal bonds to finance the construction of the Sports Complex in Mesa, Arizona. He incorporated Legacy Cares as an Arizona non-profit entity so it could qualify as the conduit borrower for the municipal bond offerings and facilitate a portion of the bonds being issued on a tax-exempt basis as qualified 501(c)(3) bonds. Arizona Industrial Development Authority, a political subdivision of the state of Arizona and an Arizona nonprofit corporation, served as the conduit issuer for the bonds.
Investors were to be paid from revenue from the sports complex, and they were given financial projections for revenues that were multiple times the amount needed to cover payments to investors, according to the SEC complaint. However, the complaint alleges that the defendants fabricated or altered documents forming the basis for those revenue projections, including letters of intent and contracts with sports clubs, leagues, and other entities to use the sports complex. They created false letterheads, forged signatures, and changed amounts to represent that the sports complex would be fully booked on opening day, per the SEC ‘s allegations. They even contracted third parties to conduct a peer review and impact analysis as well as a feasibility study to assure investors, but those were based on the defendants’ false revenue projections the SEC claimed. The sports complex opened with far fewer events and much lower attendance and generated tens of millions less in revenue than expected under the false projections. The bonds ultimately defaulted.
Defendants personally profited from the bond revenue. Chad Miller paid himself more than approximately $30,000 per month after the alleged fraudulent bond offering. De Laveaga received a consulting fee of more than approximately $20,000, and Randy Miller received approximately $230,000. Legacy Cares filed for Chapter 11 Bankruptcy and the Sports Complex was ultimately sold for less than $26 million to a new company which now operates it. Due to the disappointing revenue, and construction and contractor liens burdening the Sports Complex, the bond investors’ bankruptcy claim recouped less than $2.5 million of the $284 million invested.
In the litigation, the SEC seeks permanent injunctions, conduct-based injunctions, disgorgement with prejudgment interest, and civil penalties. The U.S. Attorney’s Office for the Southern District of New York also announced criminal charges against these defendants.
Facing SEC Charges for a Fraudulent Municipal Bond Offering?
Nationally acclaimed and recognized SEC defense attorney, David Chase of the Law Firm of David R. Chase, based in Fort Lauderdale, Florida, represents individuals and companies under SEC investigation throughout the country. David previously served as Senior Counsel in the SEC’s Enforcement Division and thus knows how the SEC investigates, prosecutes and settles its cases. If you are under SEC investigation, or just received a SEC Subpoena, call David now at: 800-760-0912, e-mail him at: david@davidchaselaw.com or visit the Firm’s website at: www.securitiesfrauddefense.net.
