Municipal Whistleblowers Bring Attention to Misuse of Federal Funds by the City of Miami, Florida

November 14, 2011 - Comments Off

Two former officials of the city of Miami are suing the city for retaliation after they were allegedly fired following their cooperation with investigations by the Securities and Exchange Commission (“SEC”) and the Federal Bureau of Investigation, reports the Wall Street Journal today.  Michael Boudreaux, the former city budget director, and Victor Igwe, the longtime city internal auditor, allege that they were terminated after they cooperated with government investigations that the city had misused funds raised for road repairs and other projects to plug their budget shortfall.

Using taxpayer funds designated for a specific purpose to fill budget gaps elsewhere would likely violate a number of state and federal laws.   Unfortunately, says David Marshall, a partner with Katz, Marshall & Banks, it is an all-too-common practice and is clearly in violation of antifraud laws, among others.   After Modoc County, California was ordered to repay more than $13 million in specifically earmarked money that it illegally misused, state controller John Chiang noted, “the misuse of public dollars, poor bookkeeping and substandard financial audits are not isolated to this county.”

According to Elaine Greenberg, head of the SEC municipal unit, the SEC is specifically on the lookout for cases where governments use money for a bond offering for purposes not specified in the offering documents.  Ms. Greenberg explains, “[y]ou can’t float a bond for one thing and use the money for another.”  As the Wall Street Journal notes, not only could doing so violate civil laws protecting bond buyers, misleading investors in borrowing documents could also violate antifraud provisions.

Comments are closed.