Three men are accused of fraud in what authorities said was a scheme to use false documents in municipal bond offerings to finance a sports complex in Arizona.
The Securities and Exchange Commission announced the charges against Randall “Randy” Miller, his son Chad Miller, and Jeffrey De Laveaga
The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, said the matter stems from plans to build a multi-sports park and family entertainment center in Mesa, Arizona, one of the largest sports venues of its kind in the nation. In August 2020 and June 2021, Randy Miller’s nonprofit company, Legacy Cares, issued about $284 million in municipal bonds through an Arizona state entity to finance the construction of the sports complex.
The SEC said that investors were to be paid from revenue from the complex, and were given financial projections for revenue that were multiple times the amount needed to cover those payments.
But according to the complaint, the defendants fabricated or altered documents forming the basis for the revenue projections, including letters of intent and contracts with sports clubs, leagues, and other entities to use the sports complex. The complex opened in January 2022 with far fewer events and much lower attendance and generated tens of millions less in revenue than expected under the false projections, and the bonds defaulted in October 2022. Prosecutors said the project filed for bankruptcy and was later sold for less than $26 million. Of those proceeds, less than $2.5 million went to repay the approximately $284 million owed to Legacy Park bondholders. Because of the defendants’ fraud, bondholders were left with near total losses, authorities said.
“As our complaint alleges, these defendants used fake documents to deceive municipal bond investors into believing a sports complex would generate more than enough revenue to make payments to bondholders,” said Antonia Apps, Acting Deputy Director of the SEC’s Division of Enforcement. “Maintaining the integrity of the approximately $4 trillion municipal bond market is critical for local governments and investors alike. The SEC will hold accountable individuals who defraud municipal bond investors.”
Randy Miller, Chad Miller, and De Laveaga were charged with violating the antifraud provisions of the federal securities lawsa. The SEC is seeking permanent injunctions, conduct-based injunctions, disgorgement with prejudgment interest, and civil penalties.
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges for similar conduct.
Randy Miller, 70, and Chad Miller, 41, both of Phoenix, were both charged in the Indictment with one count of conspiracy to commit wire fraud and securities fraud, which carries a maximum term of five years in prison; one count of securities fraud and one count of wire fraud, each of which carries a maximum term of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory minimum sentence of two years in prison.
“As alleged, Randy Miller and Chad Miller swindled investors out of over a quarter of a billion dollars by selling municipal bonds they knew were backed by forgeries and lies,” said Acting U.S. Attorney Matthew Podolsky. “Municipal bonds fund critical public projects and investors rely on accurate financial disclosures to make informed decisions. This Office is committed to protecting the integrity of the public finance system. When individuals abuse that system and investors’ trust, we will hold them accountable.”
The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655-6002 or through our online contact form for a no-cost evaluation of your matter.
