Are Investors Listening When Politicians Speak? Assessing the Securities Fraud Liability of Political Officials Who Manage Large Civic Works Projects

Jeffrey S. Huang

Municipal Finance Journal, 2005, vol. 26, issue 1, 27 - 52

Abstract: In recent years, the SEC has aggressively pursued securities fraud actions against local government officials and political figures in charge of large public works projects issuing municipal bonds to finance such projects. This article argues that because the liability of a political official differs in a number of important respects from that of a corporate officer, the threat of criminal liability for securities fraud in these cases may not be substantial. Existing securities law doctrines or safe harbors can and should be extended to apply to the political officials’ unique situation and should recognize the fact that putative misstatements or material omissions relating to the issuance of municipal securities used to fund public works projects are substantially political in nature and, thus, distinguishable from those relating to private securities.

Date: 2005
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