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You may have lost money in your investment portfolio,
due to mismanagement and not even know it.

Math doesn't add up with muni bond issuance: criminal conviction

Cooking the books.

It's a time-honored recipe for scam artists trying to stay a step ahead of regulators who are on their heels probing for evidence of securities fraud.

And, in the case of civic officials serving as principals raising money for a community through the issuance of municipal bonds, the stew that resulted wasn't particularly tasty.

In fact, the former executive director of a local development corporation operative in one New York community recently pleaded guilty in federal court to a count of securities fraud and an additional charge of criminal conspiracy for the central role he played in defrauding local residents.

In discussing the plea, now outgoing U.S. Attorney Preet Bharara additionally noted "thousands of investors across the country" who lost money following their reliance on issuers' fabrications regarding the ability to make timely principal and interest payments and the claimed source of revenues for doing so.

Bharara stated his office's belief that the ex-executive is the first person ever in the United States to plead guilty to securities fraud linked to municipal bond issuances.

The defendant will be sentenced later this year, with a potential 20-year prison term awaiting him. Officials from the U.S. Securities and Exchange Commission have filed a tandem civil action against him and an associate. The latter is contesting all charges against him.

Contrary to the defendant's recurrent assertions, much of the fraudulent scheme was orchestrated to hide the sad reality of the local community's steadily dwindling general fund. As a recent media report on the scam notes, the long-term cover-up marked by false accounting entries "kept the general fund from having a negative balance."

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