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SEC Levies Fraud Charges Against Texas-Based Municipal Advisor, Owner for Lying to School District

Posted on May 13, 2018 at 8:40 AM

The SEC charged a registered municipal advisor and its owner with defrauding a south Texas school district in connection with multiple municipal bond offerings. The SEC’s order instituting proceedings found that in connection with three municipal bond offerings between January 2013 and December 2014:

  • Mario Hinojosa and his wholly-owned municipal advisor, Barcelona Strategies LLC, misrepresented their municipal advisory experience and failed to disclose conflicts of interests to their client, a local school district in South Texas.  
  • While working as a paralegal, Hinojosa set up Barcelona, registered it as an SEC municipal advisor, drafted a marketing brochure about the firm, and circulated the brochure to the school district and other municipalities.  
  • The brochure created the misleading impression that Hinojosa and Barcelona had served as a municipal advisor on numerous municipal bond issuances and failed to disclose that Hinojosa had a financial interest in the school district’s offerings.  
  • By virtue of their misrepresentations and omissions, Barcelona and Hinojosa improperly earned hundreds of thousands of dollars in municipal advisory fees.

The SEC’s order found that Hinojosa and Barcelona engaged in fraudulent, deceptive, or manipulative acts and breached their fiduciary duties to municipal clients. Without admitting or denying the allegations, Barcelona and Hinojosa consented to a cease-and-desist order and are jointly and severally liable for paying $362,606 in disgorgement and $19,514 in prejudgment interest. Barcelona was also assessed a civil penalty of $160,000 while Hinojosa was assessed a civil penalty of $20,000. Finally, Hinojosa was barred from association with various regulated entities, including municipal advisors.

Read More:
Release
https://www.sec.gov/news/press-release/2018-82" target="_blank">https/www.sec.gov/news/press-release/2018-82
Order
http/www.sec.gov/litigation/admin/2018/34-83191.pdf

Categories: Fraud