Res No 135-18-15168RESOLUTION NO. 135-18-15168
A Resolution authorizing and instructing the City Attorney to settle the case
of City of South Miami vs Luis R. Figueredo, Case Number 10-46712 CA 10
and instructing the City Manager to take the necessary steps to comply with
the settlement terms.
WHEREAS, in 2010 Laurence Feingold was the City's attorney and at that time the City
filed suit against Mr. Luis R. Figueredo concerning the issuance of certain tax-exempt bonds in
2002 and 2006 (the "Bonds") to finance the construction of the City's parking garage ("Garage
Project"); and
WHEREAS, the City claimed that Mr. Figueredo was the City Attorney at the time of
the issuance of the 2002 and 2006 bonds and that he was responsible for the loss of the tax-
exempt status of the Bonds; and
WHEREAS, in the year 2002, Earl Gallop appears to have been the City Attorney; and
WHEREAS, in early 2002 the City entered into a lease agreement with Mark Richman
Properties ("MRP") which provided the City with air rights over the properties owned by MRP;
and
WHEREAS, according to the transcript of a meeting of the City Commission in 2003,
the original Garage Project contemplated in the MRP lease only committed the City to building a
two-floor parking garage and 19,000 square feet of retail space. It appears from these records
that the bonds issued in 2002 would have been sufficient to build such a project; and
WHEREAS, according to the opinion of the City's special IRS counsel, the original
development agreement for the Garage Project did not immediately disqualify the 2002 South
Miami Bond as tax -exempt bonds; and
WHEREAS, after the initial 2002 Bond issuance, Mr. Richman and the City continued to
revise the plans for the Garage Proj ect; and
WHEREAS, at some point after the issuance of the 2002 Bond, MRP and the City
agreed that MRP would develop the Garage Project and, in June of 2002, the City loaned
$2,500,000 of the 2002 Bond proceeds to MRP ("Developer Loan"). According to the City's
IRS counsel, this Developer Loan was an impermissible private loan under Section 141 of the
Internal Revenue Code of 1986, as amended ("Code"), adversely affecting the tax-exempt status
of the 2002 Bonds; and
WHEREAS, in late 2002, according to court documents, the City announced its intention
not to proceed with the Garage Proj ect; and
WHEREAS, Mr. Richman, according to transcripts of one of the City's MRP Shade
meetings, had purportedly advanced a substantial amount of money and he filed suit against the
City for damages for breach of contract; and
Page 1 of3
Res. No. 135-18-15168
WHEREAS, on February 1, 2005, the City Commission appointed Luis R. Figueredo as
the City Attorney; and
WHEREAS, in 2005, the City entered into a settlement agreement changing the terms of
the original development agreement. As a result of this new agreement, the Garage Project grew
from two (2) floors of parking to five (5) floors and the retail grew from 19,000 square feet to
24,500 (+ or -) square feet of retail; and
WHEREAS, the City also entered into a new Lease Agreement as part of the settlement
agreement whereby Mark Richman Properties would operate the Garage Project and retain
certain income from the Garage Project for a term of 50 years from the opening date of the
Garage Project; and
WHEREAS, in December of2006, the City then entered into a $5,629,708.40 Loan
Agreement ("2006 Loan Agreement") with the Municipal Loan Council that was derived from
tax-exempt Revenue Bonds, ("2006 South Miami Bonds"). Under the 2006 Loan Agreement,
the City agreed to take all necessary actions to preserve the tax -exempt status of the 2006 South
Miami Bonds. The proceeds of the 2006 Loan were to be used to finance additional costs of the
Garage Project; and
WHEREAS, according to the opinion of the City's special IRS counsel, the new
agreement with Mr. Richman, that differed from the original 2002 lease agreement, allowed for
private activity that was prohibited when using tax-exempt bonds to build the project. However,
the prohibited private activity was only triggered when the parking rates were actually charged
by Mark Richman Properties for the Garage Project in January of2008; and
WHEREAS, in 2010 the City, realizing that it had violated its Loan Agreement and
jeopardized the tax-exempt status of the Municipal Loan Council's bonds, contacted the IRS and
in 2011, the City entered into a voluntary agreement with the Internal Revenue Service which
resulted in the City paying approximately $755,000; and
WHEREAS, the City also voluntarily contacted the Security and Exchange Commission
("SEC") to report the foregoing activity and the City consented to an order of the SEC in 2013;
and
WHEREAS, the SEC order places a substantial amount of the blame for the SEC
violations on the City's finance department during the years of2002 through 2009; and
WHEREAS, the Mayor and City Commission desires to settle the case against Mr.
Figueredo.
NOW THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY
COMMISSIONERS OF THE CITY OF SOUTH MIAMI, FLORIDA:
Page 2 of3
Res. No. 135-18-15168
Section 1. The City Attorney is hereby authorized and instructed to settle the case for
$10,000 to be paid by Luis R. Figueredo, in exchange for a voluntary dismissal of the City's case
against Mr. Figueredo with prejudice.
Section 2. The City Manager is instructed to sign a Joint General Release if the parties can
agree on its terms and which must be approved in form by the City Attorney, and to take all
appropriate steps to accomplish the intent ofthis resolution.
Section 3. Severability. If any section clause, sentence, or phrase of this resolution is for
any reason held invalid or unconstitutional by a court of competent jurisdiction, the holding shall
not affect the validity of the remaining portions of this resolution.
Section 4. Effective Date. This resolution shall become effective immediately upon
adoption.
PASSED AND ADOPTED this 17th day of July, 2018.
ATTEST:
c~
COMMISSION VOTE: 5-0
Mayor Stoddard: Yea
Vice Mayor Harris: Yea
Commissioner Welsh: Yea
Commissioner Gil: Yea
Commissioner Liebman: Yea
Page 3 of3
City Commission Agenda Item Report
Meeting Date: July 17, 2018
Submitted by: Thomas Pepe
Submitting Department: City Attorney
Item Type: Resolution
Agenda Section: RESOLUTION(S)
Subject:
Agenda Item No:5.
A Resolution authorizing and instructing the City Attorney to settle the case of City of South Miami vs Luis R.
Figueredo, Case Number 10-46712-9342 CA 10 and instructing the City Manager to take the necessary steps
to comply with the settlement terms. 3/5
(City Attorney)
Suggested Action:
Attachments:
Reso authorizing settlement 3.docx
Order 5-22-13.pdf
1
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES ACT OF 1933
Release No. 9404/ May 22, 2013
ADMINISTRATIVE PROCEEDING
File No. 3-15329
In the Matter of
CITY OF SOUTH MIAMI, FLORIDA
Respondent.
I.
ORDER INSTITUTING CEASE-AND-DESIST
PROCEEDINGS PURSUANT TO SECTION
8A OF THE SECURITIES ACT OF 1933,
MAKING FINDINGS, AND IMPOSING
REMEDIAL SANCTIONS AND A CEASE-
AND-DESIST ORDER
The Securities and Exchange Commission ("Commission") deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act
of 1933 ("Securities Act") against the City of South Miami, Florida ("Respondent" or "City").
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the "Offer") which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission's jurisdiction over it and the subject matter of these
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making Findings,
and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order") I, as set forth below.
ITI.
On the basis of this Order and Respondent's Offer, the Commission finds that:
The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any
other person or entity in this or any other proceeding.
5
SUMMARY
1. This matter involves a municipality that jeopardized the tax-exempt status of
municipal bonds by improperly utilizing proceeds received through a conduit borrowing. The City
of South Miami, Florida misrepresented and omitted material information concerning the
eligibility of a parking garage for tax-exempt financing in a pooled conduit municipal bond
offering in 2006 by the Florida Municipal Loan Council ("FMLC"). The City borrowed funds in
2002 and again in 2006 to construct the largest municipal parking garage in its principal downtown
commercial district. The City's participation in the offering enabled it to borrow funds from the
FMLC at advantageous tax-exempt rates.
2. The City omitted to disclose to the FMLC that it had jeopardized the tax-exempt
status of both bond offerings by impermissibly loaning proceeds from the offering to a private
developer ("Developer") and restructuring the parking garage lease agreement with the Developer
prior to the 2006 bond offering. In documents prepared in connection with the 2006 offering, and
explicitly relied upon by Bond Counsel in rendering its tax opinion attached to the Official
Statement, the City made material misrepresentations and omissions regarding: (1) the use of the
proceeds of the offering and, (2) the altered terms of the parking garage lease.
3. The City's misrepresentations and omissions had a material impact on the tax-
exempt status of the municipal securities issued in connection with this offering. In July 2010, the
City filed a material event notice and disclosed for the first time the adverse impact of its actions
on the tax-exempt status of the two bond offerings. In August 2011, the City entered into
agreements with the Internal Revenue Service ("IRS"), paying $260,345 to the IRS and defeasing a
portion of the two prior bond offerings at a cost of $1.16 million, so as to preserve their tax -exempt
status for bondholders.
4. By engaging in this conduct, the City violated Sections I7(a)(2) and I7(a)(3) of the
Securities Act.
RESPONDENT
5. The City of South Miami is a municipality located in Miami-Dade County,
Florida. The City of South Miami was incorporated in 1927 and has an estimated population of
approximately 11,000 residents.
BACKGROUND
A. The City Seeks Financing for a Parking Garage Through the FMLC Program
6. Starting in 1997, the City sought financing to develop a public parking garage (the
"Project") to manage a lack of available parking space in the City'S downtown commercial district.
The City issued a request for proposals to develop the Project, which ultimately became a mixed-
use retail and public parking structure to be developed by a for-profit Developer. In March 2002,
the City Attorney, on behalf of the City, negotiated a lease agreement (the "2002 Lease") with the
Developer, under which the City would be responsible for the cost of construction of the Project,
2 6
less the amount required to construct the retail portion of the Project. The City retained full control
over the operation and maintenance of the parking portion of the Project and all parking revenues.
7. The Developer's limited role under the 2002 Lease was critical to the City receiving
the benefits of any tax-exempt financing. Under applicable IRS regulations, the Project could be
financed on a tax-exempt basis only if its use by for-profit businesses, such as the Developer, was
kept to a minimum.
8. The City approved the financing to cover construction of the tax-exempt portion of
the Project through its participation in the FMLC's 2002 bond pool. However, upon receiving a
copy of the 2002 Lease sent by the City's then-Finance Director (the "2002 Finance Director"),
bond counsel for the FMLC identified a potential tax issue raised by the Project's mixed
public/retail nature. During subsequent conference calls between bond counsel and the 2002
Finance Director, bond counsel communicated to the City officials that none of the proceeds of the
bond offering could be used to fund the retail portion of the building. However, subsequent
finance directors were unaware of the substance of these discussions.
9. Thereafter, bond counsel concluded that no tax issues existed concerning the
anticipated borrowing by the City from the FMLC based on, among other things, the City's
representation that no funds from the bond offering would be used to finance the retail portion of
the Project.
10. In May 2002, the City executed a loan agreement (the "2002 Loan Agreement"),
which was reviewed by the City Attorney, and various documents relating to the City's
participation in the FMLC's 2002 bond pool. In the Tax Certificate executed by the 2002 Finance
Director, the City made several material representations that the City would not use funds
borrowed from the FMLC for private use and that the City's Project would be owned and operated
in a manner that complied with IRS regulations for tax-exempt financing. Additionally, the former
Mayor executed a 2002 Certificate of Borrower and the 2002 Loan Agreement which stated that
the City would not violate the private use restrictions associated with tax-exempt financing.
11. On May 17, 2002, the FMLC issued $49.8 million of Series 2002A Revenue Bonds
("2002 Bonds"). The City borrowed $6.5 million of the bond proceeds to finance the Project.
Relying in part on the City's certifications and representations, bond counsel rendered a legal
opinion to bondholders to the effect that the interest on the 2002 Bonds was tax-exempt. Because
the FMLC's bond offering qualified as tax-exempt financing, the City borrowed funds from the
FMLC at advantageous tax-exempt rates.
12. Notwithstanding the City's representations made to the FMLC relating to the 2002
Bonds, in June 2002 --less than one month after the offering --the City loaned the Developer $2.5
million of the bond proceeds (the "Developer Loan"). The 2002 City Manager, on behalf ofthe
City, and the Developer executed this loan without consulting or informing any FMLC
representatives or bond counsel.
3
7
B. The City Improperly Revises the Project Lease
13. Later that year, based on concerns regarding the City's ability to pay the debt
service on the 2002 Bonds, the City Commission voted to cancel the Project and ceased further
construction of the parking garage and retail space. As part of the settlement of subsequent
litigation filed by the Developer regarding the Project, the City Attorney negotiated a revised lease
with the Developer (the "2005 Lease").
14. The 2005 Lease significantly changed several key provisions from the 2002 Lease
regarding the use of the Project. Among other things, the 2005 Lease leased to the Developer the
entire structure of the Project, including the retail space and the parking garage. In contrast, the
2002 Lease only leased the retail space to the Developer, while the City maintained and operated
the parking garage. Additionally, pursuant to the 2005 Lease, the Developer now owed the City
rent payments for the parking garage as well as the retail portion, with the Developer and the City
sharing in the profits of the parking garage portion of the Project.
15. The terms of the 2005 Lease caused the Project to be considered "private business
use" and, therefore, further jeopardized the tax-exempt status of the 2002 Bonds and raised an
additional risk to investors. The City did not inform the FMLC, bond counsel, or any other third
parties to the 2002 Bonds transaction about the changes to the Project. Instead, with the City's
approval, the City Attorney negotiated the 2005 Lease believing there would be no implications for
the 2002 Bonds. The commissioners approved the 2005 Lease and the 2005 City Manager
executed the lease on behalf of the City.
C. The City Made Misrepresentations and Omissions
in a 2006 Bond Offering with the FMLC
i. The City Seeks Further Project Financing Through the FMLC
16. By the fall of2006, the City's Project was still incomplete. The then-City Finance
Director ("2006 Finance Director") communicated to the FMLC that the City was still working on
the Project using proceeds from the 2002 Bonds but that the City was nearly out of funds and
required additional funding for completion. The City sought to borrow an additional $5.S million
through the FMLC's program to continue construction on the Project.
17. In October 2006, the City submitted its application for participation in the
upcoming bond offering ("2006 Bonds,,2) to the FMLC. From October 2006 through January
2007, among other things, bond counsel reviewed submissions by the City and other municipalities
and also participated in discussions with the FMLC, the underwriters, the borrowers and their
counsel.
18. In various communications, the City did not inform the FMLC that the 2002 Lease,
which bond counsel previously reviewed and concluded would not impair the tax-exempt status of
the 2002 Bonds, had been modified and that the 2005 Lease impermissibly leased the entire
2 The Official Statement for this bond offering references "Series 2006" bonds, however, the closing date for
this transaction was on January 9, 2007.
4 8
parking garage to the Developer, including the public and retail portions. Further, the City did not
notify the FMLC that only one month after the 2002 Bonds were issued, the City provided the
Developer with a $2.5 million loan directly from the proceeds ofthe FMLC's tax-exempt bonds.
ii. The City Made Material Misrepresentations and
Omissions in the FMLC's 2006 Bond Offering
19. Notwithstanding the terms of the City's 2005 Lease as well as the developer loan,
the City misrepresented to the FMLC that its participation in the 2006 bond offering complied with
tax-exempt requirements.
20. The City made misrepresentations to the FMLC in several documents, including the
Loan Agreement, regarding compliance with the tax-exempt status of the loan. In particular, in
January 2007, the 2006 Finance Director executed a Tax Certificate with the FMLC, which made
the following misrepresentations:
• Not more than 10% of the proceeds of the City of South Miami Loan will
be used (directly or indirectly) in a trade or business (or to finance facilities
which are used in a trade or business) carried on by any person other than a
state or local governmental unit. Not more than 5% of the proceeds of the
City of South Miami Loan will be used (directly or indirectly) in trade or
business (or to finance facilities which are used in a trade or business)
carried on by any person other than a state or local governmental unit which
private business use is not related to any governmental use or is
disproportionate to governmental use ...
• The City reasonably expects that the Project will be owned and operated
throughout the term of the City of South Miami Loan in a manner that
complies with the requirements set forth in Paragraph 23 above. The City
will not change the ownership or use of all or any portion of the Project in a
manner that fails to comply with Paragraph 23 above, unless it receives an
opinion of Bond Counsel that such a change of ownership or use will not
adversely affect the exclusion of interest on the Series 2006 Bonds from
gross income for federal tax purposes.
21. Employees in the City's Finance Department were the primary contacts for the
FMLC and bond counsel during the application process. Based on the existence of the 2005 Lease,
which leased the entire parking structure of the Project to the Developer, and the Developer Loan,
the 2006 Finance Director signed an inaccurate 2006 Tax Certificate on behalf of the City.
22. According to the Official Statement for the 2006 Bonds, the FMLC explicitly relied
on the City's representations that the information did not contain any untrue statement of material
fact or omit any material fact necessary to make the statements made, in light of the circumstances,
not misleading. Based on the City's covenants and representations, bond counsel issued a bond
opinion concluding that interest on the 2006 Bonds was exempt from federal income tax.
5 9
D. The City Incorrectly Files Annual Certifications with the FMLC
23. From 2003 through 2009, on behalf of the City, various finance directors
incorrectly certified to the FMLC that the City was in compliance with the terms of the loan
agreements. One of those terms was that no events had occurred which affected the tax -exempt
status of the bonds.
24. For example, in 2003,2004 and 2005, the 2002 Finance Director, and in 2006 the
2006 Finance Director incorrectly certified to the FMLC that the City was in compliance with the
terms of the 2002 Loan Agreement relating to the bonds.
25. In 2008, bond counsel learned of the 2005 Lease. In February 2008, bond counsel
explained in a conference call with the City Attorney and the then-Finance Director ("2008
Finance Director"), that the 2005 Lease would cause the City's loan and the 2002 and 2006 Bonds
to be considered private activity bonds unless the City amended the 2005 Lease to comply with the
IRS's guidance concerning the management of public facilities by for-profit entities. Nevertheless,
the City never amended the 2005 Lease so as to comply with applicable IRS rules.
26. Despite this failure, and notwithstanding the City's communications with bond
counsel and the FMLC about the tax implications of the 2005 Lease, the then-Finance Director
("2009 Finance Director"), who replaced the 2008 Finance Director in March 2008, incorrectly
certified that the City was in compliance with the terms of the 2002 Loan Agreement and 2006
Loan Agreement. Although the 2009 Finance Director also attended a subsequent conference call
at which bond counsel reiterated the need to restructure the 2005 Lease to avoid forfeiture of the
tax-exempt status, the 2009 Finance Director incorrectly certified in 2009 that the City was in
compliance with the terms of the loan agreements relating to the bonds.
27. The City's Finance Department experienced significant turnover from 2005 through
2009. The annual certifications required as part of the financing were signed by at least four
different finance directors who were unaware of the implications of the certifications and how the
2005 Lease and Developer Loan affected the tax status of the bonds. The City's finance directors,
while responsible for receiving, signing, and returning the annual compliance certifications, had no
. previous experience completing, reviewing, or assessing disclosure requirements or tax issues in
bond offerings and did not receive any training or guidance on the subject.
28. On July 19,2010, the City submitted a material event notice pursuant to its
contractual commitments with underwriters subject to the requirements of Rule 15c2-12 of the
Securities Exchange Act of 1934 with the MSRB' s Electronic Municipal Market Access
("EMMA") system/ publicly acknowledging a potential adverse impact on the tax-exempt status
of the 2002 and 2007 Bonds. Notwithstanding that bonds of each series had been trading since
their respective offering dates, this was the first time that the City publicly acknowledged any
potential adverse impact on the tax-exempt status of the 2002 and 2006 Bonds.
3 In December 2008, Rule 15c2-12 was amended to designate EMMA as the ceritral repository for ongoing
disclosures by municipal issuers effective July 1,2009.
6 10
E. The City Settles with the Internal Revenue Service
29. On July 13,2010, the City, jointly with the FMLC, sought permission from the IRS
to apply for a settlement under the IRS's Voluntary Compliance Agreement Program ("VCAP") in
an attempt to preserve the tax-exempt status of the 2002 and 2006 Bonds. The VCAP program
involves self-reporting of potential problems with tax -exemption issues.
30. On August 17,2011, the City and the IRS executed two "Closing Agreements"
("Agreements") settling the matters at issue. The IRS required the City to pay settlement amounts
totaling $260,325.40. Furthermore, prior to executing the Agreements, the City was required to
establish an irrevocable defeasance escrow for the purpose of defeasing significant portions of the
2002 Bonds and 2006 Bonds and retiring them on their earliest call dates. In order to finance the
defeasance, the City entered into a new taxable bank loan resulting in an additional cost to the City
of$1,164,008.24. As a result of the Agreements, bondholders are not required to include any
interest from the bonds in their gross incomes.
LEGAL DISCUSSION
31. Municipal securities represent an important part of the financial markets available
to investors. By participating in the FMLC's pooled bond offering in 2006 as a conduit borrower,
the City was able to obtain advantageous tax-exempt rates. Conduit borrowers of municipal
securities have an obligation to ensure that fin~ncial information contained in their disclosure
documents provided to issuers is not materially misleading. Proper disclosure allows investors to
understand and evaluate the financial health of the state or local municipality in which they invest.
32. The City, which participated in municipal securities offerings as a conduit borrower
of bond proceeds, is subject to the antifraud provisions of the federal securities laws, such as
Section 17(a) of the Securities Act of 1933. That section prohibits the obtaining of money by
means of any untrue statement of material fact or omitting to state a material fact in the offer or
sale of securities. A fact is material if there is a substantial likelihood that its disclosure would be
considered important by a reasonable investor. Basic Inc. v. Levinson, 485 U.S. 224, 231-32
(1987). Violations of Sections 17(a)(2) and (3) may be established by showing negligence. SEC
v. Steadman, 967 F.2d 636,643 n.5 (D.C. Cir. 1992).
VIOLATIONS
33. As a result of the negligent conduct described above, the City violated Sections
17(a)(2) and 17(a)(3) of the Securities Act. Specifically, the City made material
misrepresentations and omissions in the 2006 Tax Certificate and Loan Agreement which certified
that the City was in compliance with the terms of the loan agreements relating to the bonds. The
City's misrepresentations and omissions were material because they directly jeopardized the tax-
exempt status of the municipal bonds, which could have caused investors to pay tax-related
penalties resulting in financial harm to investors. Moreover, numerous investors traded the 2002
and 2006 Bonds at prices that assumed those bonds were tax-exempt. Information regarding the
bonds' tax-exempt status was important to investors in evaluating whether to purchase bonds
through this municipal securities offering.
7 11
THE CITY'S REMEDIAL EFFORTS
34. In detennining to accept the Offer, the Commission considered the cooperation
afforded the Commission staff and the remedial acts taken by the City, referenced in paragraphs
29-30.
UNDERTAKINGS
35. The City agrees to retain, at the City's expense and within 120 days of this Order, an
independent third-party consultant, not unacceptable to the staff, for a period of three years, to
conduct annual reviews of the City's policies, procedures, and internal controls regarding: its
disclosures for municipal securities offerings, including: (i) disclosures made in financial
statements; (ii) disclosures made pursuant to continuing disclosure agreements and disclosures
regarding credit ratings; (iii) the hiring of internal personnel and external experts for disclosure
functions; (iv) the designation of an individual at the City responsible for ensuring compliance by
the City of such policies, procedures, and internal controls; and (v) the implementation of active and
ongoing training programs for, among others, the City Attorney(s), the City Manager, the Mayor,
the City Finance Director, and the City Commissioners regarding compliance with disclosure
obligations. After such review, which the City shall require to be completed within 300 days of the
of issuance of this order, the City shall require the independent third-party consultant to submit to
the City, a report making recommendations concerning these policies, procedures, and internal
controls with a view towards assuring compliance with the City's disclosure obligations under the
federal securities laws. The City will submit to the Commission, the findings of the independent
consultant making recommendations for any changes in or improvements to City's policies,
procedures, and practices, and a procedure for implementing such recommended changes. The City
agrees to adopt the recommendations made in such report within 90 days from the date of the report.
36. Within 14 days of the City's adoption of the independent third-party consultant's
recommendations, the City agrees to certify in writing to the Commission staff that the City has
adopted and implemented the recommendations. The certification shall identify the undertaking(s),
provide written evidence of compliance in the form of a narrative, and be supported by exhibits
sufficient to demonstrate compliance. Thereafter, the City agrees to require the independent third-
party consultant to conduct annual reviews in years two and three following the order, to assess
whether the City is complying with its policies, procedures, and internal controls, and whether the
new policies, procedures, and internal controls were effective in achieving their stated purposes.
The Commission staff may make reasonable requests for further evidence of compliance, and
Respondent agrees to provide such evidence. All certifications of compliance and supporting
material shall be submitted to Jason R. Berkowitz, Assistant Regional Director of the Municipal
Securities and Public Pensions Unit in the Miami Regional Office, with a copy to the Office of
Chief Counsel of the Enforcement Division.
37. The City shall require the independent third-party consultant to enter into an
agreement that provides that for the period of engagement and for a period of two years from
completion of the engagement, the third-party independent consultant shall not enter into any
employment, consultant, attorney-client, aUditing or other professional relationship with the City,
or any of its present or former affiliates, directors, officers, employees, or agents acting in their
capacity. The agreement will also provide that the independent third-party consultant will
8 12
require that any firm with which he/she is affiliated or of which he/she is a member, and any
person engaged to assist the independent third party in performance of his/her duties under this
Order shall not, without prior written consent of the Division of Enforcement, enter into any
employment, consultant, attorney-client, auditing or other professional relationship with the City,
or any of its present or former affiliates, directors, officers, employees, or agents acting in their
capacity as such for the period of the engagement and for a period of two years after the
engagement.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions
agreed to in the City's Offer.
Accordingly, pursuant to Section 8A of the Securities Act, it is hereby ORDERED that:
A. The City of South Miami shall cease and desist from committing or causing any
violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act.
B. The City of South Miami shall comply with its undertakings as enumerated in
paragraphs 35 -37 in Section III above.
By the Commission.
9
Elizabeth M. Murphy
Secretary
13