WASHINGTON (AFX) - The Securities and Exchange Commission on Thursday filed new civil charges against a Pennsylvania underwriter and the man who served as its chairman, alleging that they sold risky bonds to four local school districts that ultimately lost more than $11 million in the scheme.
Robert Bradbury, who was chairman of the municipal-bond underwriting firm Dolphin and Bradbury Inc., was accused of improperly selling the notes, issued to finance a golf course in central Pennsylvania. The municipality responsible for the golf course defaulted on the payment of the notes in September 2004.
'The school districts were left holding the bag,' said Mark Zehner, the SEC's regional municipal securities counselor.
The lawsuit was filed less than a month after the SEC upheld a $400,000 fine on Dolphin and Bradbury and ordered it to return more than $300,000 of gains. An $80,000 fine against Bradbury was also upheld. The firm and Bradbury were found to have been reckless in selling $75 million in tax-exempt municipal bonds in 1998.
In its latest case, the SEC said that Bradbury sold the golf-course notes to the school districts because there were no other buyers. Regulators said that Bradbury didn't disclose the risks of the golf-course notes, and said that the notes were inappropriate for school districts, which are limited to conservative investments.
An attorney for Bradbury was on vacation and couldn't be reached.
The SEC said that it is seeking to bar Bradbury from serving as an officer or director of a public company and to force him to give up improperly earned money. Regulators are also seeking to impose civil penalties. As part of that effort, regulators are seeking to reverse actions that put Bradbury's money off-limits.
Regulators said that in August 2002, shortly after he was notified of probable legal action by the SEC, Bradbury improperly transferred his home to his wife, Margaret. The home was valued in April 2002 at $2.25 million, the SEC said. In total, he transferred some $5.4 million in assets to his wife, including money, a Georgia vacation home and several cars, the SEC said. Regulators are asking a judge to transfer back the assets to Bradbury's name.
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