SEC Settles Fraud Charges Against Allen Park
ALLEN PARK (WWJ/AP) - Federal securities regulators said Thursday they have settled fraud charges against a Detroit suburb and two former officials linked to a bond offering for a failed movie studio project.
The Securities and Exchange Commission announced the charges against the city of Allen Park, former Mayor Gary Burtka and former administrator Eric Waidelich at the same time as the settlement. Regulators accuse the city and the men of providing false and misleading statements about the failed Unity Studios project to prospective investors of $31 million in general obligation bonds.
"Allen Park solicited investors with an unrealistic and untruthful pitch, and used outdated budget information in offering documents to avoid revealing its budget deficit," Andrew Ceresney, director of the SEC's Enforcement Division, said in a release.
The city and former officials agreed to settle without admitting wrongdoing and Burtka will pay a $10,000 penalty.
Allen Park recently sold the failed studio site -- a big step toward the state resolving the city's financial emergency.
The studio project was announced with great fanfare in 2009 by Burtka after the state had enacted legislation providing some of the nation's most generous film tax credits. The city originally planned a studio with eight sound stages.
The SEC says the project had "deteriorated" to building and operating a vocational school on the site by the time bonds were issued, yet public statements and other documents offered no information about problems. Likewise, city officials didn't share information with prospective investors about the city's budget deficit of at least $2 million in 2010.
Allen Park's financial troubles are partly a product of a failed project. The city issued $25.5 million in bonds in 2009 to finance land acquisition for the studio. After a review of city finances, the state said officials paid about $11 million more than the property was worth. But projects never materialized and Unity Studios left the city after just one year, leaving Allen Park with annual $2 million debt service payments. The property was listed formally put up for sale in October 2012.
The $12 million deal with Time Equities, finalized in August, includes the 104-acre property adjacent to City Hall. The deal calls for payments to be made over a 7½-year period, and includes a community benefits agreement to provide job training through a partnership with Wayne County and Michigan Works.
MORE: Allen Park Finalizes Sale Of Failed Movie Studio Complex
Burned By Movie Studio, Allen Park Gets Emergency Manager
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