While it was startling, the SEC announcement that it had simultaneously brought fraud charges against the City of Harrisburg and settled them without penalty was not surprising.
In detailing the series of missteps, misstatements and omissions in the city's sorry incinerator bond saga, the SEC simply added its voice to the chorus of those seeking to understand how this train wreck happened.
Was someone asleep at the switch? Was deliberate fraud committed? Or, like desperate gamblers too far in the hole, did those responsible simply continue to up the ante, hoping to not only cover their losses but win big enough to dig the city out?
The SEC documents released Monday don't answer those questions, but they indicate a pattern of intentional actions that ultimately misled investors: reports unfiled for years, inaccuracies in others and, equally damning in the SEC's eyes, a 2009 State of the City address that substituted political speak for facts.
The agency provided guidance in 1994 that cautioned public officials about the statements they make concerning their municipal securities. For executives at publicly traded companies, those rules are strict; violations can bring heavy penalties, including fines and jail time, depending on intent. Public officials, the SEC said, are no different.
In 2009, Mayor Steve Reed referred to the incinerator as "a challenge … that can be resolved," the SEC notes, without mentioning either the burden debt repayment had placed on the city's general fund or that the request for a much-needed rate increase had failed.
In the absence of timely and accurate financial disclosures, those remarks carried more weight in the municipal market. (That failure to file, it should be noted, continued into Mayor Linda Thompson's administration.)
The SEC's action in Harrisburg sends a strong message to municipal officials across the country.
That's fine. But where does it leave Harrisburg, as a new municipal election approaches?
No one to date has been held accountable for the city's insolvency or the reckless series of financial moves that brought it there — though that's not to say criminal or civil actions can't still come. Somebody, somewhere, failed to perform due diligence.
But while the Business Journal eschews political endorsements, we feel strongly that voters need to examine closely anyone on the ballot who was involved in city government during this shameful time in Harrisburg's history to determine whether they are capable of leading the city — or deserve to.