April 29, 2013 8:40 PM
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Jim E. Winburn, Staff Writer
VICTORVILLE • The Securities and Exchange Commission on Monday filed a fraud complaint against the city of Victorville, a securities underwriting firm and others involved in a 2008 municipal bond offering.
The lawsuit, filed in the U.S. District Court in Los Angeles, claims that that those involved with issuing the bonds inflated the value of four hangars at Southern California Logistics Airport that were eventually built with money raised by the debt securities.
The suit specifically names as defendants the city of Victorville, bond underwriter Kinsell, Newcomb & DeDios and two of its officers, the SCLA Airport Authority and Victorville Assistant City Manager Keith Metzler, who is in charge of the airport.
According to the SEC complaint, the defendants “all knew that the assessed value of the hangars was inflated, and, as a result, that the tax increment and debt service ratios disclosed to investors were false.”
According to the complaint, the Airport Authority and KND told investors that four SCLA hangars were valued at $65 million. In fact, the value of the hangars was less than half that, according to the SEC.
Victorville city officials and Jeffrey Kinsell, owner of KND, were quick to refute the allegations.
City and Airport Authority officials said in a news release that though they had not reviewed the complaint, they doubted that the SEC could back up its allegations.
“The facts as we understand them to be from recent discussions with SEC staff attorneys are not supported by evidence currently in their possession,” the release stated.
Terree Bowers, an attorney with Arent Fox, a Los Angeles-based law firm representing both the city and the Airport Authority said, “We respectfully disagree with the SEC’s allegations as we understand them and will vigorously fight this case.”
Sam Puathasnanon, Senior Trial Counsel for the SEC’s Los Angeles office, rebuffed the city’s official response that the SEC’s allegations lack evidence. He said that the federal agency stands by its evidence in the complaint.
In specifically naming Metzler, KND owner Jeffrey Kinsell and KND Vice President Janees L. Williams, the SEC’s allegations were pointed, saying they committed false and misleading statements in the Airport Authority’s 2008 bond offering.
The SEC seeks permanent injunctions against all parties, preventing them from engaging in these practices again. The SEC is also seeking repayment of the money with interest and civil penalties. The SEC’s complaint does not provide an exact dollar amount of the possible judgment.
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