Former Sterlington, Louisiana, mayor Vern Breland has agreed to settle a Securities and Exchange Commission lawsuit that alleged he and Sterling’s municipal advisor, Aaron Fletcher of Twin Spires Financial, misled investors on two offerings worth $5.8 million.
Without admitting or denying the findings, Breland has been permanently barred from participating in future issuances of municipal securities and is barred from participating in any scheme to defraud investors. He has agreed to pay a civil monetary penalty, which has still yet to be determined.
Fletcher and Twin Spires Financial settled with the Commission for violating antifraud provisions and for failing to register as a municipal advisor. They were ordered to pay disgorgement of $26,303, prejudgment interest of $6,642 and a civil penalty of $200,000.
The SEC generally doesn’t seek retribution against municipalities due to its negative impact on taxpayers and Sterlington agreed to a cease and desist order against future violations.
“Investors in Sterlington’s bonds had a right to know that the town had obtained approval of the bond offerings based on false projections and had misused proceeds from prior offerings,” said LeeAnn Gaunt, chief of the SEC’s Public Finance Abuse Unit in the complaint. “Further, it is long past time for financial advisors to municipal issuers to comply with the requirement that they must be registered with the Commission before they provide municipal advice, and we will vigorously pursue advisors who continue to flout those requirements.”
Sterlington began plans to upgrade its sewer system in 2015 and in accordance with Louisiana state law, wrote to the State Bond Commission for approval of its Series 2017 $4 million utility revenue bonds and its Series 2018 $1.8 million wastewater, water and sewer treatment utilities revenue bonds.
The complaint against both parties was lobbed in June 2022 and a few months later, Breland, representing himself, questioned the role of the state bond commissioner, the lack of damages to the investors and his own lack of experience with bond issuances and securities law.
Breland did acknowledge the estimates in question, which the Commission argued substantially overstated the number of historical and projected sewer customers in order to mislead the Louisiana State Bond Commission, were prepared by his co-defendants and even though the proceeds weren’t spent on sewer upgrades as promised, they still financed city operations, he argued.
The bonds were sold via private placement and Breland defended the accuracy of the disputed estimates, calling them reasonable estimations “of the future income of the city of Sterlington including its actual operation.”
Breland has also been indicted by the State of Louisiana with a charge of malfeasance in office for his role in adding $20 million in debt during his tenure as mayor and spent some $3 million on unlawful expenditures, in addition to flouting public bid law on major public works.
He was booked at the Ouachita Correctional Center in August 2020 and released on $25,000 bond. The case remains ongoing.