A former Rockland County official admitted that he and another official lied to municipal bond investors to conceal a town’s deteriorating finances.
Aaron Troodler, former executive director of the Ramapo Local Development Corp. and assistant town attorney for the town of Ramapo, pleaded guilty on Tuesday to securities fraud and conspiracy in federal court in White Plains.
The U.S. Attorney’s Office described schemes in which Troodler and Christopher P. St. Lawrence, Ramapo town supervisor and president of the RLDC, fabricated the town’s finances to help sell $150 million in municipal bonds.
They were originally charged last April with securities fraud, wire fraud and conspiracy. St. Lawrence has pleaded not guilty and a trial has been scheduled for next month.
Most of the charges center on a minor league baseball stadium, now known as Palisades Credit Union Park.
Taxpayers had rejected a proposal to build the stadium by a 70 percent margin in a 2010 referendum. Then St. Lawrence said it would be built with private funds. But the town, the government said, paid for more than half of the $58 million project.
RLDC, the development corporation created and owned by the town, issued a $25 million bond in 2011.
The government said that St. Lawrence of Wesley Hills, and Troodler, 42, of Bala Cynwyd, Pennsylvania, masked their use of public funds for RLDC projects and that the stadium project in particular severely strained town finances.
For six years, Ramapo reported general fund balances ranging from $1.4 million to $4.1 million. Actually, according to a lawsuit filed last year by the U.S. Securities and Exchange Commission, general fund balances ranged from minus $249,000 to minus $13.9 million.
That matters to bond investors because the town guaranteed the bond payments. Investors were told that principal and interest would be paid with stadium revenues, meaning that the town would not have to pay off the bonds and making the bonds appear less risky.
The government has 47 tape recordings, but only two that were monitored by law enforcement, according to a defense motion challenging their accuracy and authenticity.
In 2013, for example, St. Lawrence assured a bond rating service that he expected the general fund to end 2012 at $2.4 million. Immediately after the telephone conference call, the government said, St. Lawrence urged town employees to refinance short-term debt as fast as possible because “we’re going to have to all be magicians to get to some of those numbers.”
The government said Troodler and St. Lawrence artificially inflated the general fund balance by using phony receivables, omitting unpaid liabilities and improperly recording transfers from another fund.
In 2010, for instance, they included a false $3.6 million receivable. Without that phony asset, the general fund would have had a negative balance.
They allegedly created another fake receivable for $3.1 million, from 2010 to 2015, based on an RLDC agreement to buy a property from the town. The sale never closed because the property was infested with rattlesnakes. If the transaction had been taken off the books, the general fund would have had a negative balance. They kept the receivable on the books, according to the government, by pledging for years that it would be paid back within a year.
Even after the FBI searched Ramapo Town Hall in 2013, St. Lawrence allegedly claimed that the town was going to receive more than $3.1 million in reimbursements from the Federal Emergency Management Agency for expenses from Hurricanes Irene and Sandy, even though claims had not been submitted.
St. Lawrence also is accused of improperly transferring more than $12 million from an ambulance fund.
The charges against Troodler carry maximum prison terms of 20 years for securities fraud and five years for conspiracy. He is scheduled to be sentenced on Sept. 18 by federal Judge Cathy Seibel.
The SEC lawsuit names the town, RLDC, St. Lawrence, Troodler and other town officials.
The SEC seeks to bar the men from the municipal bond market and require the government agencies to implement court-supervised monitoring of their finances and practices for five years.
The SEC, FBI and Rockland County District Attorney’s Office assisted in the investigation.
Troodler’s plea might be the first conviction of a public official for federal securities fraud involving municipal bonds, U.S. Attorney Preet Bharara said in a news release.