Town of Oyster Bay, et al.

The Securities and Exchange Commission today announced a settlement with the Town of Oyster Bay, New York. In November 2017, the SEC charged Oyster Bay and the former Oyster Bay supervisor John Venditto with defrauding investors in Oyster Bay’s municipal securities offerings by hiding the existence and potential financial impact of side deals with a businessman who owned and operated restaurants and concession stands at several town facilities.

According to the SEC’s complaint against Oyster Bay and Venditto, which was filed in U.S. District Court for the Eastern District of New York, Oyster Bay agreed several years ago to indirectly guarantee four separate private loans to the vendor totaling more than $20 million.  The SEC’s complaint alleged that Oyster Bay and Venditto concealed the indirect loan guarantees when they should have been disclosed in connection with the town’s 26 securities offerings from August 2010 to December 2015.  According to the complaint, this information was material to current and prospective investors due to the potential impact on Oyster Bay’s finances.

Oyster Bay has agreed to settle the case by agreeing to permanent injunctions against violating the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 and to the retention of an independent consultant to advise the town on its policies, procedures, and internal controls regarding its disclosures for securities offerings. The settlement is still subject to district court approval.

The SEC’s litigation against Oyster Bay was led by Alison R. Levine, Ladan F. Stewart, and Alexander Vasilescu and was supervised by Sanjay Wadhwa, LeeAnn Ghazil Gaunt, and Mark R. Zehner. The SEC’s litigation against Venditto continues.