Wednesday, June 25, 2014

Tip of the Iceberg in Illinois? SEC Obtains Court Order to Halt Fraudulent Bond Offering by City of Harvey, Ill.

The Securities and Exchange Commission has obtained an emergency court order against a Chicago suburb and its comptroller to stop a fraudulent bond offering that the city has been marketing to potential investors.

The SEC has filed fraud charges in U.S. District Court for the Northern District of Illinois against the city of Harvey, Ill., and Joseph T. Letke alleging that they have been engaging in a scheme for the past several years to divert bond proceeds for improper, undisclosed uses.  The SEC’s complaint alleges that the purported purpose of prior bond offerings was to fund the development and construction of a Holiday Inn hotel in Harvey.  However without informing investors, Harvey officials diverted at least $1.7 million of bond proceeds from these offerings to pay the city’s operational costs such as its payroll, and Letke received approximately $269,000 in undisclosed payments derived from bond proceeds.  While investigating Harvey’s past bond offerings to investors, the SEC learned that the city is intending to issue new limited obligation bonds as early as this week, and draft offering documents make materially misleading statements about the purpose and risks of those bonds while omitting that past bond proceeds have been misused.

In response to the SEC’s request for emergency relief, Judge Rebecca Pallmeyer conducted an emergency hearing today and issued a temporary restraining order preventing Harvey from offering or selling any bonds through July 14.  At the hearing, Harvey agreed to this restriction.

Illinois at the state and local level is a train wreck waiting to happen. Interest rates are headed up anyaway, so there is no reason to be holding any municipal bonds, never mind bonds out of Illinois.



  1. "Tip of the Iceberg in Illinois?" No.

    Harvey has been crooked, corrupt, crime ridden, and broke for decades. In the mid-late 1980s it became best not to drive through much of Harvey and it hasn't gotten any better. In other words this is just another episode in the long on-going saga of Harvey. To give a sense of how long this has been going on, Dixie Square Mall in Harvey is the Mall the Blues Brothers drove through. It had closed down shortly before filming in 1979. It never re-opened. It was demolished in 2011 or 2012.

    The Holiday inn in Harvey (or just outside it) closed down in the early 1990s or late 80s as I recall. It was located a half block west of Halsted street on 171st near I80/294. There's no good reason to build another as far as I know. Other hotels have taken all the business at the I80/I294 exit.

    1. Jimmy that can't be true. why one of the local channels has uncovered the fact that one of the sports bars in Harvey is actually a strip club and the city of Harvey is attempting stop this scourge so the public are not lured into these dens of iniquity.

    2. Harvey has strip clubs... right by the site I mentioned above. Which is the site of the hotel this bond deal went to as I've learned:

      Guess instead of building a new hotel they were going to rebuild this one and turn it back into a Holiday Inn.