HARRISBURG, PA – No one answered the phone or the door at former Mayor Steve Reed’s home Tuesday nearly 24 hours after the U.S. Securities and Exchange Commission announced a settlement with Pennsylvania’s capital city over fraud charges rooted in activity during his administration.
Some public finance and securities experts saw the settlement – dubbed “toothless” by one – as a warning to municipalities that consequences await them if investors are misled by false or incomplete financial statements from local governments.
Others, however, criticized SEC for failing to hold the city’s hired advisers to account.
“Reed ran the city, (current Mayor Linda) Thompson (is running) the city,” said Mark Schwartz, a former bond lawyer who previously represented Harrisburg City Council on its ultimately rejected bankruptcy petition. “There is a ‘buck stops there’ liability for (city leaders), but the people who do the work are bond lawyers. These are bonds that never should have been issued. Reed cannot issue bonds on his own. Professionals were abysmal in terms of fulfilling their responsibilities to investors and they have gotten off scot-free. They’ve made millions.”