SEC Settles Fraud Charges With Illinois Mayor
The SEC has announced that the mayor of Harvey, Ill., has agreed to pay $10,000 and never participate in a municipal bond offering again in order to settle fraud charges.
The U.S. Securities and Exchange Commission (SEC) recently announced that the mayor of Harvey, Ill., has agreed to pay $10,000 and never participate in a municipal bond offering again in order to settle fraud charges.
The agency alleged that Eric J. Kellogg was connected to a series of fraudulent bond offerings by the city. According to the SEC, investors were told that their money would be used to develop and construct a Holiday Inn hotel in Harvey, but instead city officials diverted at least $1.7 million in bond proceeds to fund the city’s payroll and other operational costs unrelated to the hotel project.
According to the SEC’s complaint filed in the U.S. District Court for the Northern District of Illinois, Mayor Kellogg exercised control over Harvey’s operations and signed important offering documents the city used to offer and sell the bonds.
Based on his control of the city, Kellogg is liable for fraud as a control person under Section 20 of the Securities Exchange Act.
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LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Public Finance Abuse Unit, commented on the situation:
Investors were told one thing while the city did another, and Kellogg was in a position to control the bond issuances and prevent any fraudulent use of investor money. His days of participating in muni bond offerings are over.
Kellogg agreed to settle the charges without admitting or denying the SEC’s allegations. The settlement is subject to court approval.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
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