Think Tank Requests SEC Investigation of California Governments Worried About Climate Change

This is going to be an interesting lawsuit.  Someone has filed suit with the Security and Exchange Commission against the State of California for selling bonds under false pretenses.

“A free-market think tank is asking the Securities and Exchange Commission for an investigation into possible bond fraud by local and municipal governments that claim they will be harmed by climate change.

The Competitive Enterprise Institute (CEI) says a number of municipalities, most of them in California, are suing oil and gas companies for future damages because of climate change, and in doing so are often explicit in their forecasts of predicted sea-level rise and monetary damages.

However, when those same cities sell bonds to investors, they’re being far more generic in their claims of future catastrophe.”

This should be the first of many lawsuits showing that the State of California has committed fraud in it sale of bonds and use of sales tax money.  Could it be that in the future government would have to be honest?

lawsuit

Think Tank Requests SEC Investigation of California Governments Worried About Climate Change

Claims local governments are specifying risks in lawsuits, but not bond disclosures

BY: Todd Shepherd, Washington Free Beacon,  2/2/18

A free-market think tank is asking the Securities and Exchange Commission for an investigation into possible bond fraud by local and municipal governments that claim they will be harmed by climate change.

The Competitive Enterprise Institute (CEI) says a number of municipalities, most of them in California, are suing oil and gas companies for future damages because of climate change, and in doing so are often explicit in their forecasts of predicted sea-level rise and monetary damages.

However, when those same cities sell bonds to investors, they’re being far more generic in their claims of future catastrophe.

“In their suits against oil and gas companies, California’s cities and counties claim that there are clear risks from manmade climate change,” CEI’s General Counsel Sam Kazman said in a statement. “But when it comes to selling their municipal bonds to the public, they say just the opposite. This is hypocritical double-talk, and it may well violate federal law against securities fraud.”

CEI cites a lawsuit against oil and gas giants including BP, Chevron, and Exxon in which the City of San Francisco claims they are expecting short-term costs of $500 million, and long-term costs of $5 billion as a result of climate change.

San Francisco’s attorneys argue that, “By 2050, for example, a ‘100-year flood’ in San Francisco is expected to occur on average once every year, and by 2100 to occur 92 times per year—or almost twice per week.

The sea level increase caused by climate change “threatens the safety and lives of San Francisco residents,” according to the suit.

However, in a bond offering from earlier this year the city stated, “The City is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City and the local economy.”

Potential damages to the city could harm the city’s ability to repay the bonds, which might affect a person’s willingness to invest.

“Investors across the country have relied upon the statements by these municipalities in choosing to invest in their bonds. They deserve accurate information as to the potential risks of their investments,” CEI wrote in a letter to the SEC’s Public Finance Abuse Unit requesting an investigation.

CEI says other California governments have done the same, such as the City of Oakland, Imperial Beach, and Marin and San Mateo counties.

The Washington Free Beacon has requested comment from officials from San Francisco, and will add those comments when they are received.

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.