City of Miami Charged in Bond Fraud

10:45 AM ET 09/23/99

MIAMI (AP) - The city of Miami and two top officials defrauded investors on three 1995 bond offerings by presenting a rosy picture of city finances when deficits were secretly mounting, federal regulators say. The following year, a $68 million hole in city funds was uncovered when corruption charges brought in a new administration. The city is still operating under a state financial oversight board.

The administrative complaint filed Wednesday by the Securities and Exchange Commission charged the city, former city manager Cesar Odio and former finance director Manohar Surana with fraudulent bond sales.

The SEC is seeking no fines but wants a cease-and-desist order requiring the city to give an accurate picture of its finances in future securities offerings.

John Incorvaia, who follows Miami finances for Moody's Investors Service, said the SEC charges should have no impact on the city's bond ratings.

Previous disclosures about $116.5 million in bond sales cited by the SEC hurt the ratings when new city management disclosed the extent of city deficits.

The city issued misleading documents before the sales and provided inaccurate financial statements afterward, the SEC charged.

The city plans to fight the charges along with a lawsuit filed by its old auditors, Deloitte & Touche. The city claims it was unaware of its own financial state, but auditors said city officials were fully informed.

Donald Bierman, attorney for Odio, said he ``depended upon his staff and believed at all times that the city, while it had its traditional cash shortfall, was solvent.''

Robert Josefsburg, attorney for Surana, did not return a call for comment.

Odio spent nearly a year in federal prison for blocking an FBI probe into city contract kickbacks and remains on probation. Surana turned government witness after he was implicated in the schemes. Investors lost no money on the bonds because there were no defaults, but the city might have been required to pay higher rates if its financial situation had been fully disclosed.

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