In 2007 and 2008, just as the Florida housing bubble was exploding spectacularly, Miami officials were scrambling to keep their budget afloat. One little trick they used, the Miami Herald later found, was shifting $26.4 million into the general fund so it looked like the city was balancing its books. Brilliant!
Unfortunately, the creative accounting amounted to misleading investors who were buying city bonds. That's what the Securities and Exchange Commission (SEC) has decided in announcing plans to file civil fraud charges against the Magic City.
The SEC sent the city a letter yesterday announcing it plans to file charges related to the budget snafu and giving city attorneys a chance to preemptively respond.
Mayor Tomás Regalado tells the Herald that the city will argue it shouldn't be charged by the agency.
"We have taken many, many measures to avoid anything like this from happening in the future," he says.
The charges relate to the city's budgets from the 2007 and 2008 fiscal years, which a Herald investigation later revealed were tainted by the $26.4 million shell game.
The move to cover general fund shortfalls with capital budget dollars was eerily similar to the same practices that landed Miami in hot water with SEC investigators in the late '90s.
Before the SEC even decides how to penalize the city, taxpayers have already paid for the dishonest bookkeeping with more than $1.4 million spent in court defense as the SEC pored over thousands of financial documents, the Herald reports.
More pain could be coming: A separate SEC probe is still ongoing into whether the city lied to investors about the millions in bonds used to pay for the new Marlins Park.
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Here's the SEC's letter to the city: