A former city of Miami budget director found liable for his role in a $153 million municipal securities fraud scheme will not face the massive $450,000 fine sought by the Securities and Exchange Commission.
Instead, Michael Boudreaux — who says his tenure with the city left him a “financially ruined man” — must pay a $15,000 penalty, an amount that U.S. District Judge Cecilia Altonaga found far more equitable.
“Overall, the factors weigh in favor of imposing a lesser penalty than the almost half-a-million dollar penalty requested by the SEC,” Altonaga wrote in an order issued Monday. “In fact, the SEC’s $450,000 request appears overreaching and punitive.”
A federal jury found in September that Boudreaux and the city engaged in a scheme during the late 2000s to hide gaping budget losses from bond investors by shifting tens of millions of dollars between accounts, which regulators likened to a “shell game.” The goal, the SEC alleged, was to make a series of bond issues appear more attractive, thereby reducing interest rates and inducing investment.
The SEC’s $450,000 request appears overreaching and punitive U.S. District Judge Cecilia Altonaga
The trial — the first ever in a municipal securities fraud case brought by the SEC — ended with a jury finding the city liable for violating three counts of the Securities and Exchange acts. The jury said Boudreaux had violated one count of the Securities Act and two counts of the Exchange Act, but was not liable on a fourth count. Altonaga fined him $5,000 per count.
The city settled in October by waiving its right to appeal and agreeing to pay a $1 million penalty. Boudreaux, accused by the SEC of masterminding the city’s scheme, maintained his innocence throughout the trial.
“As Mr. Boudreaux and his lawyers have continuously stated, Judge Altonaga agreed that ‘Boudreaux was a local government employee who did not financially gain from the violations,’” defense attorney Benedict Kuehne wrote in a statement. “Michael Boudreaux is gratified and relieved Judge Altonaga saw fit to impose only the minimal money payment of $15,000.”
In arguing for the steep penalty against Boudreaux, the SEC’s attorneys said he remained without remorse for his role in the city’s manipulations and that he’d behaved egregiously. They argued that his attorney indicated during the trial that his annual salary at a Catholic nursing home facility in Louisiana remained around $150,000.
In reality, a financial affidavit filed by Boudreaux shows his salary is now about $62,000. Altonaga noted that the jury never determined whether Boudreaux acted recklessly or “knowingly,” and disagreed that he’d behaved egregiously, which Boudreaux’s camp held up as something of a vindication.
Altonaga also denied the SEC’s request to file a permanent injunction barring Boudreaux from working in securities in the future.
“Boudreaux’s name has appeared throughout the news and, needless to say, his career and reputation have been drastically affected,” Altonaga wrote. “There is little to no chance Boudreaux will ever work for a municipality again, let alone in a position giving him the ability to make decisions affecting bonds or securities, or the investing public.”