Securities Law

SEC accuses Pennsylvania capital of securities fraud; ex-mayor's positive statements targeted

Public officials who make positive statements about the fiscal health of their financially troubled cities are now forewarned: The assertions could result in accusations of securities fraud.

The Securities and Exchange Commission cited public statements by officials with Harrisburg, Penn., in a suit accusing the city of securities fraud, report the Wall Street Journal (sub. req.) and the Patriot News. The city settled without paying a fine and without admitting or denying the accusations. No individuals were cited.

The city’s financial problems stem from a costly incinerator project. The SEC claimed the city misstated its credit rating and made misleading statements apart from its securities disclosure documents.

According to the Wall Street Journal, the SEC “took issue with Harrisburg officials for doing what many public officials often do: Putting a good face on a difficult situation.” Among the statements targeted was a State of the City address in 2009 by Harrisburg’s then-mayor that described the incinerator as an “issue that can be resolved.”

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