SEC Notice of Violation of Beaumont Financing Authority Cease and Desist Order

I appreciate the Cease and Desist Order Issued to the Beaumont Financing Authority on August 23, 2017, but it has fallen on deaf ears.

On September 5, 2017 the Beaumont City Council Approved two Agenda Items in violation of the Cease and Desist Order and had nothing on the Agenda to Comply with the Order:

Agenda Item 11. Webb and Associates $231,591 Contract Extension as ‘Special Tax Consultant’ even though the CFD Property Taxes were just submitted to the County in August: https://beaumont.civicweb.net/document/8409/Item%2011.pdf?handle=4F68BFD1FA444043A2EB23356980B04E

Agenda Item 12. CFD Prepayment Policy via Webb and Associates: https://beaumont.civicweb.net/document/8410/Item%2012.pdf?handle=C6827A26D52044C298F6AA7500972DD2

Former City Manager Alan Kapanicas invented the prepayment scam in response to citizens’ complaints about bond financing. The money was never used to pay down the bonds and the City has repeatedly stated that there are no records. Webb and Associates already tried to scam citizens out of $800 just to calculate how much it would cost for the property owner to prepay their portion of the bond.

Judy Bingham read the SEC Order to Council and explained to the Council that they have to hire honest staff, submit legal Infrastructure Certificates of Completion and Financial Statements, and stop Violating State and Federal Laws.

Below is the Transcript from the September 5, 2017 Beaumont City Council Meeting in which Mayor Lloyd White instructing his City Attorney John Pinkney and City Manager Todd Parton to respond to Mrs. Bingham’s statements. The City made it clear that they have no intention of complying with the Cease and Desist Order in general and specifically will not “..comply with all existing continuing disclosure undertakings, including updating past delinquent filings ..”

We will submit another Public Records’ Request for the Documents verifying Prepayments, Bond Fund Accounts, Infrastructure Certificates of Completions, and Revised 2014 and 2015 Financial Statements that are not Forged.

White: Mr. Pinkney, I’d like you to address two topics: Without admit or deny; discuss why Council is reluctant to discuss the SEC Settlement, and then the Cease and Desist. Does the Cease and Desist apply to New Funding? What does a Cease and Desist tell us that we need to do? If you can, I don’t know.

Pinkney: The Settlement with the SEC involves an Agreement that the City is neither Admitting or Denying the Allegations. In terms of the Cease and Desist; that requires the - there was no Penalty, not Financial Penalty imposed against the City. But it does require the City to bring in an Independent Party to advise the City to make sure it’s complying with SEC Laws on a going-forth basis. And that needs to be somebody that the City hasn’t had a relationship with, I believe in the last two years. None of what was discussed tonight has anything to do with that. The role that Webb and Associates was here to discuss with you was not to fill that position, that would be somebody else. But again; the Cease and Desist is a requirement that the City comply with Securities Laws on a going forward basis.

White: I’m speaking just for myself here. I’m not in any hurry to go back into the Public Market until we have a lot of what’s in place that the SEC has required us to put in place like the Consultant, like the processes, like the procedures. We are NOT locked out of the Bond Market, correct?

PInkney: Correct.

White: Okay, thank you.

Pinkney: Whether the City decides to go into the Public Market or not is a decision you’ll have to make at some point, but you’re not prohibited. Some of the Parties in the SEC Case are.

White: And once we have some of the safeguards in place we’ll need to revisit this. Mr. Parton; I’d like you to address the response that Mrs. Bingham got about no Records for Prepayments.

Parton: Yes. The record keeping was poor across the City, across specifically the CFDs. The Reconciliation went through a process to look at where those Funds were allocated, what was being held, what was in the Trustee’s hands, and what was left outstanding. We went through a process to look at what contracts and what had been documented in terms of Expenditures. With that was an estimate in regard to the amount of Prepayments that were made. Just as we had a Disclaimer on it; we discussed quite a bit that we had to make some assumptions with regard to those Prepayment Amounts of where they would have come from and how they’ve been applied. The methodology at the time for prepayments really didn’t follow industry standards and didn’t follow protocols like we’re talking about implementing at this point. We can go back and evaluate and track that, but something else too is the $500 cost of being Assessed is rolled into the Prepayments that people were getting. So we went to the Rate-making process. The only difference here is somebody could go in, query it, and then say okay, here’s what my prepayment is. But that cost is already in there. So what we’re look at I think is providing a little bit of relief in that you can come in at the initial cost of $400 and run the work that’s necessary to calculate your prepayment. And then should you decide to go ahead and make that payment or make that commitment, then that final piece is accessed. That’s not a new fee, that’s something that has been charged already. Has been charged.

White: And the $400 verses $100 is because the work that is done to get the calculations to be able to provide a number of what the prepayment amount; is most of the work.

Todd: That’s correct. This is a discretionary decision of each and every taxpayer to have the right to look at and run an estimate of that prepayment calculation is, but this is something that’s going back as a decision. Just as we charge fees for other discretionary services that somebody may choose to use; this is would be consistent with that.