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Since running a story Thursday about attorneys for Councilwoman Toni Atkins having settlement talks with the investigating Securities and Exchange Commission, I’ve received some questions from readers about what could happen to a politician involved in such talks.
Here’s an explanation from a story we ran in February about the SEC’s investigation:
Penalties assessed against individuals who are found culpable of securities fraud are far-ranging. There are essentially three levels of fraud, spanning from negligent to reckless to intentional. Responsible parties can be ordered to stop engaging in the practice that was found illegal, be forced to step down from their current position as an officer or director at the entity where the wrongdoing occurred, or barred from ever serving as an officer or director of an organization that issues securities publicly.
Elected city officials, just as a board of directors, could be subject to the same penalties corporate overseers face, if they were found culpable of securities fraud, said Ed McIntyre, a securities attorney with Soloman Ward.
“A municipality, when it goes to the public marketplace, is as much a reporting entity as anyone else,” said McIntyre.
To be sure, it’s unknown how far settlement talks went, if they are still ongoing or even what exactly was being settled. Atkins hasn’t returned calls seeking comment and her attorney has declined to divulge specifics, too.
The story we ran in February, which you can read in its entirety by clicking here, said this about a related case:
In 1996, Orange County faced SEC actions similar to what sources say the city will face along with individuals at the focus of the agency’s probe.
The SEC, that year, determined that Orange County had misled investors about the security of bonds the county had issued. Though the SEC took direct aim at Orange County’s elected Board of Supervisors, its investigation only led to enforcement actions against former Treasurer-Tax Collector Robert Citron, who was elected to his post. Citron pleaded guilty to six felony counts that were brought by the U.S. Attorney’s Office.
But the supervisors were reprimanded by the SEC and ordered to abandon past practices.
“Although the [Board of Supervisors] may delegate certain of these duties to county officers and employees, it is ultimately responsible for the execution of these duties,” the SEC determined.