September 01, 2013 10:42 PM

VICTORVILLE • The city, airport authority, and a city official on Friday filed separate replies in support of their motions to dismiss federal claims for relief over alleged investor fraud.

In its response to the Securities and Exchange Commission’s claims for relief, attorneys for the city of Victorville and the Southern California Logistics Airport Authority proposed that even if valuations for its airport hangars were allegedly inflated, they still met the market’s required benchmark.

The defendants in their reply argued that whether the alleged misstated hangar value of $65 million is used — or the alleged correct hangar value of $27.7 million is used — the debt service ratio remains above 1.25 in either case.

“That simple fact — asserted and supported in the city’s and authority’s motion to dismiss — cuts to the heart of the SEC’s case,” attorneys for the defendants wrote in their reply to the U.S. District Court in Los Angeles on Friday. “That fact … means that even if the allegations in the complaint are true, on the SEC’s own terms, they do not constitute a material misstatement to the reasonable investor.”

The defendants’ reply was made in response to a SEC motion to deny the city and airport authority’s earlier request to dismiss several federal claims for relief.

The defendants filed a motion in June to dismiss the first, second, and seventh claims for relief in the SEC’s April 29 lawsuit, which blames the defendants for allegedly overstating the values of the four SCLA hangars in an April 2008 bond offering.

The SEC stated in its complaint that the market required the 1.25 debt service ratio, and that meeting this annual requirement was also a prerequisite to the issuance of the bonds under the indenture.

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