The federal agency says the action does not mean securities laws were broken in the bankrupt city. The city attorney vows cooperation with the probe.
By Abby Sewell and Phil Willon, Los Angeles Times
October 17, 2012
The U.S. Securities and Exchange Commission has opened an inquiry into the city of San Bernardino’s financial affairs as the city makes its way through a contentious bankruptcy process.
The city filed for Chapter 9 bankruptcy protection Aug. 1 after learning in July that it faced a $46-million budget shortfall, making it the third city in California to fail this year. Since then, city officials have traded blame and allegations as they work through a plan to cut costs and return the city to solvency.
The Oct. 11 letter from the commission’s office of enforcement to the city said the regulatory agency had opened an “informal inquiry” and requested that the city and its joint powers financing authority not alter or destroy financial documents and a list of records relating to the city’s bond issuances and financial state, including communications with underwriters, financial advisors and bond counsel.
The inquiry “should not be construed as an indication… that any violation of the federal securities laws has occurred,” the SEC’s attorney wrote. An SEC spokesman declined to comment on the inquiry.
City Atty. James Penman, to whom the letter was addressed, said he spoke with SEC attorneys Tuesday and assured them the city would cooperate.
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