Attorneys must answer or ask to dismiss by June 5
May 27, 2014 5:46 PM

VICTORVILLE • The Securities and Exchange Commission recently amended its complaint alleging fraud in a 2008 municipal bond offering against the city, Assistant City Manager Keith Metzler and others. The SEC had to do so to comply with a federal judge’s order to show proof of earlier dismissed claims that the city and Metzler were also benefactors of ill-gotten gains.

Filed on May 21 in federal court, the amended complaint contains 20 new elements which revolve largely around allegations that Metzler, who oversees Southern California Logistics Airport, failed to act while aware that four hangars at SCLA had dramatically-inflated assessed valuations. One add-on in the complaint speaks to how the proceeds from the offering inured to the benefit of the city.

“For example, proceeds from bonds issued by the Authority in December 2007 and proceeds from notes entered into between the Authority and a private bank in February 2008 were used to make a $50 million down payment on behalf of the city for a power plant turbine,” the complaint reads.

Attorney Terree Bowers of Los Angeles-based Arent Fox LLP, who is representing the city and the SCLA, said Tuesday that they “still vigorously oppose” the allegations. Attorneys have until June 5 to answer or motion to strike the amended complaint.

The SEC sued officials in April 2013, saying they defrauded investors because they knew the assessed values of four hangars at SCLA were inflated by more than double. As a result, the tax increment and debt service ratios disclosed to investors were false, they said.

In November, a judge threw out the portion of the lawsuit which said the city and Metzler improperly benefited from the resulting bond sale. While he said those claims lacked evidence, he also provided the SEC an opportunity to later amend their complaint with proof.

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