Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that CHRISTOPHER ST. LAWRENCE, the former Ramapo Town Supervisor, was sentenced to 30 months in prison today in connection with his scheme to defraud investors in municipal bonds issued by the Town of Ramapo (the “Town”) and the Ramapo Local Development Corporation (the “RLDC”). ST. LAWRENCE was found guilty of 20 counts of fraud and conspiracy following a four-week trial last May before United States District Judge Cathy Seibel in federal court in White Plains. It was the first conviction for securities fraud in connection with municipal bonds.
Acting U.S. Attorney Joon H. Kim said: “For years, Christopher St. Lawrence, as Ramapo Town Supervisor, misled municipal bond investors about the state of Ramapo’s finances. At a trial earlier this year, the jury quickly saw through his years lies, and today, he was sentenced to time in federal prison. The integrity of the $3.7 trillion municipal bond market must be protected, and prosecutions like this one should put on all on notice that misleading investors in that market through fraud and deception will lead to prosecution and jail.”
According to the allegations contained in the Indictment and the evidence presented in court during the trial:
As of August 2015, the Town had more than $128 million in outstanding bonds that had been issued for various municipal purposes, while the RLDC, a corporation created and owned by the Town under state law, had issued $25 million in bonds to pay for the construction of Provident Bank Park, a minor league baseball stadium in Ramapo.
While the fraud predated the construction of the stadium, the Town’s financial problems were caused largely by the $58 million total cost of the stadium. The Town paid more than half of that cost, despite the rejection of the Town’s guarantee of bonds to pay for construction of the stadium in a Town-wide referendum in 2010 and ST. LAWRENCE’s public statements that no public money would be used to pay for the stadium.
The Indictment charged that ST. LAWRENCE lied to investors in the Town’s and RLDC’s bonds in order to conceal the deteriorating state of the Town’s finances and the inability of the RLDC to make scheduled payments of principal and interest to holders of its bonds from its own money. ST. LAWRENCE lied to investors primarily by making up false assets in the Town’s General Fund.
The General Fund is the Town’s primary operating fund. The accumulated difference over time between how much money the Town receives in taxes and fees and how much it spends in a year is the fund’s balance. The fund balance is a cushion that can be spent during difficult financial times. The size of the fund balance relative to the amount of the fund’s revenue and trends in the Town’s General Fund balance over time are the primary indicators of the Town’s financial health.
According to the Indictment and the evidence, ST. LAWRENCE lied to the RLDC’s bond rating service in January 2013 when he told them in a telephone call that the 2012 fund balance would remain unchanged from the 2011 balance. Immediately after that call ended, ST. LAWRENCE told Town employees “to do [an upcoming] refinancing of the short term debt as fast as possible because . . . we’re going to have to all be magicians to get to some of those numbers.”
When the RLDC issued $25 million in bonds to build the stadium building itself in 2011, ST. LAWRENCE inflated the size of the Town’s General Fund by including a false $3.6 million receivable in the General Fund. The Town’s financial condition was important to investors in the RLDC’s bonds because the Town guaranteed the payments of principal and interest on the bonds. Without that fake asset, the General Fund’s balance would have been negative in that year.
In addition, ST. LAWRENCE inflated the General Fund with another fake receivable for $3.08 million from 2010 through 2015. It first went on the Town’s books when the RLDC agreed to buy property known as The Hamlets from the Town for $3.08 million. That sale never closed because the land turned out to be a habitat for rattlesnakes. Rather than take the receivable off the Town’s books – and reduce the size of the General Fund balance by $3.08 million, thereby pushing it into negative territory – ST. LAWRENCE claimed the receivable had to do with the RLDC’s purchase of another property from the Town that had already taken place. To keep it on the books, ST. LAWRENCE then caused the Town Attorney to tell the Town’s auditors over a period of years that the receivable would be paid back within a year, which was required if the receivable were going to stay in the General Fund. Without this fake receivable alone, the Town’s General Fund balance would have been negative for years.
In May 2013, the FBI searched Town Hall in connection with this investigation. Less than 10 days later, ST. LAWRENCE inflated another receivable in the General Fund – this one for money from FEMA to reimburse the Town for expenses from Hurricanes Irene and Sandy. ST. LAWRENCE claimed that the Town was going to receive $3.145 million from FEMA when the Town hadn’t even submitted those claims to FEMA yet. Without ST. LAWRENCE’s inflation of this receivable alone, the projected General Fund balance for 2012 would have been negative when the Town sold bonds in May 2013.
Finally, the Indictment alleged and the evidence showed that ST. LAWRENCE told investors in the Town’s and RLDC’s bonds that the RLDC was making the payments on its bonds from its operating revenue, meaning money it was making from its ordinary business of running the baseball stadium and selling condominiums at a development it had built. That was important to investors because it led them to believe that the Town would not have to pay off the RLDC’s $25 million bonds. It also made the RLDC’s bonds look less risky. The RLDC actually made those payments from money it borrowed from the bank or money it got from the Town.
In addition to the prison term, ST. LAWRENCE, 67, of Wesley Hills, New York, was sentenced to three years of supervised release and a $2,000 special assessment. Restitution, if any, will be determined at a future date.
Mr. Kim praised the investigative work of the Federal Bureau of Investigation and the Rockland County District Attorney’s Office. Mr. Kim also thanked the Securities & Exchange Commission for its substantial assistance in the investigation and trial.
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