Blogging Bayport Alameda

August 31, 2016

You’ve been seriously misled

Filed under: Alameda — Lauren Do @ 6:01 am

For those of you out there that still read the Alameda Journal, you may have caught this article that posted: SEC: city of Alameda misled investors over bonds.


The city of Alameda is among 71 cities or public entities across the country that the Securities and Exchange Commission said misled investors by not disclosing enough financial information when they sold municipal bonds.

The failures came to light under the Municipalities Continuing Disclosure Cooperation Initiative, a voluntary program that lets local governments review documents associated with bonds issued over the past five years for any violations of federal securities laws, such as failing to include an annual financial report. The initiative allows favorable settlement terms through self-reporting any violations.

The commission said Alameda falsely claimed it had met all its continuing disclosure requirements in a 2012 competitive offering, and that it filed late audited financial reports and failed to timely file required notices of late filings, according to court documents.

Two 2013 competitive offerings were also misleading because the city did not meet all its disclosure obligations and filed late audited financial reports, the commission said. The city also did not file any audited financial statements with the commission for fiscal years 2008 through 2012.

Sounds pretty bad right?  On the bright side because Alameda voluntarily came forward there were no monetary fines levied.

From my understanding here’s what happened: the City of Alameda hired a bond compliance auditor to review the books and that audit uncovered that between 2008 through 2012 the City of Alameda delayed filing the Comprehensive Audited Financial Report (CAFR), approved budgets, and the City’s credit rating. Because of this process the City now has in place protocols to ensure that it doesn’t end up in the same position as before.

According to my sources the people responsible for the oversight of these matters are the City Manager and the Finance Director.

So 2008 though 2012 was an interesting time for the City.  In 2008 the City of Alameda brought on board an interim Finance Director under City Manager Debra Kurita. That person?  Ann Marie Gallant. Debra Kurita was quietly ousted in early 2009 and after a short stint of David Brandt as Acting City Manager, interim Finance Director Ann Marie Gallant was elevated to interim City Manager. In December of 2010 Ann Marie Gallant’s contract was not renewed and the City of Alameda spent early 2011 with acting folks at the helm and in June of 2011 John Russo took over as City Manager.

This was a long introduction to point out that Ann Marie Gallant, despite being lauded as having all these fiscal chops and being this great financial guru really fell down where it matter: doing basic paperwork.  The time that she was both the Finance Director and the interim City Manager she failed, despite being fixated on bonds and things, to keep the City of Alameda in basic compliance.

So much for being the next best thing since sliced bread.

Anyway, the “misleading investors” thing sounds really bad, but the positive is that the City of Alameda realized there were deficiencies in the way it was doing business in the past thanks to some janky city managing, corrected it and fessed up to the proper authorities.



  1. This has been happening all across the municipal bond market for the last couple of years. Disclosures have been a pet project for regulators because it is an easy money machine for them. Countless issuers all over the country have been hit with these “violations” which are almost always minuscule and technical in nature and very seldom material. Underwriters have been hit with much greater fines for similarly de minimis items. This has been aggravated (or assisted, if you’re on the regulatory side) by frequent changes in rules and inconsistent communication & enforcement of same.

    This is the equivalent of going 26 in a 25 zone for half a block and most likely had zero to do with who was in the chair at city hall. If anyone is to “blame” — in quotes because it is so extremely insignificant — it would probably be bond counsel or underwriters, but this whole thing is a non-issue.

    Comment by dave — August 31, 2016 @ 6:28 am

  2. What I find interesting is that, of all such entities in the entire state of California, Alameda is the only one which was singled out for this dis-honor. Why?

    I doubt this has much if anything to do with Gallant. As most people who have already commented on this story have said–and it has been widely reported outside of the AJ–whoever was hired as bond counsel is likely to blame. Maybe that counsel, whoever it is, is the common denominator for the entities on this list.

    Comment by vigi — August 31, 2016 @ 9:14 am

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