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HesperiaStar.com
  • Metzler's salary lower since '08 bond sale, attorney says

    SEC stays course on ill-gotten gains claim against city, official
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  • VICTORVILLE — An attorney for Assistant City Manager Keith Metzler said in federal court filings this month she could testify that her client hadn’t been “unjustly enriched” in a controversial 2008 municipal bond offering.
    Since February, Metzler has turned over to the Securities and Exchange Commission copies of bank and investment account statements, W-2 and 1099 forms, copies of pay stubs and other documents alluding to salary, financial and personnel information, according to Attorney Judy Kwan with Los Angeles-based Orrick, Herrington & Sutcliffe LLP.
    Kwan said all those documents actually indicate a decrease in Metzler’s salary since an April 2008 bond offering that has been the target of the SEC probe for more than three years.
    “The amount of Mr. Metzler’s salary and benefits received from the city were not tied in any way to the (Airport) Authority’s bond issuances,” reads Kwan’s June 5 declaration filing.
    But federal securities officials want Metzler and the city held liable for the $13.3 million netted from the allegedly fraudulent offering, while attorneys for the defendants continue to argue that there’s no merit to the claim that ill-gotten gains were paid to either.
    The SEC in April 2013 sued Metzler — the overseer of Southern California Logistics Airport — as well as the airport authority, the city and bond underwriter officials for misrepresentations in that bond sale.
    The SEC alleged the combined valuation of four airport hangars was $65 million when they were purportedly known by the defendants to be worth just $27.7 million. And that dramatic inflation equated to fraud, the agency says, since the tax increment and debt service ratios disclosed to investors were false.
    In a recent court filing, securities officials painted the picture of a dire need by defendants to raise money “using any possible means to develop the (airport).” Those means, they say, included additional misrepresentations in the April 2008 official statement regarding BNSF as well as a since-failed EB-5 program and an attempt to issue bonds through the Victorville Water District to fund a sewer for the Dr Pepper Snapple plant.
    Attorneys for the defendants have adamantly denied any wrongdoing. In a motion to dismiss the case last year, lawyers for the city and SCLA said the alleged $37.3 million inflated valuation “ultimately boils down to only a $200,000 differential in tax increment.” They said that was too small to be material.
    Legal counsel for Metzler and the city have requested the court strike down the ill-gotten gains pursuit, also known as a prayer for disgorgement, and disallow the SEC from trying to revive it should it be dismissed for a second time. A federal judge first dismissed prayers in November against Metzler, the city and the airport authority, citing lack of evidence. But the prayer against the authority was later reinstated and the SEC last month filed an amended complaint in hopes of strengthening the case against the others.
    “Thus, the SEC now urges this court to require Mr. Metzler to disgorge $13.3 million in proceeds that he never received or had control over,” Metzler’s attorneys said on June 5, “but that it says were received entirely by the city and SCLA (Authority).”
    A hearing on this latest legal wrangle — which represents only a portion of the SEC’s lawsuit — is scheduled Sept. 22, court records show. The SEC is also contending two counts of fraud in connection with the purchase or sale of securities against the airport authority; and aiding and abetting against Metzler and the city.
    A jury trial is tentatively scheduled for March 17, 2015 should a settlement not be reached before then, according to court records.
    Shea Johnson may be reached at 760-955-5368 or SJohnson@VVDailyPress.com. Follow him on Twitter at @DP_Shea.
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