Former Ramapo LDC Director Pleads Guilty in Bond Fraud Case
John Jordan | March 2017
WHITE PLAINS—The former executive director of the Ramapo Local Development Corp. N. Aaron Troodler pled guilty on March 7th to federal securities fraud and conspiracy charges in connection with the bond financing for the construction of what is now known as the Palisades Credit Union Park, and other projects, including the failed The Hamlets condominium project.
The guilty plea was based on indictments unsealed last April and superseding information that allege that Town Supervisor St. Lawrence and Troodler lied to investors in the town’s and RLDC’s municipal bond issues in order to conceal what the federal government charges was the “deteriorating state of the town’s finances and the inability of the RLDC to make scheduled payments of principal and interest to holders of its bonds from its own money.” The federal government states that the alleged securities and wire fraud resulted in “investors in all town and RLDC bonds outstanding during the relevant time period, have, to date, suffered millions of dollars in losses.” According to the U.S. Attorney, “Troodler defrauded both the citizens of Ramapo and thousands of investors around the country, helping to sell over $150 million of municipal bonds on fabricated financials.”
The same day as the unsealing of the indictments last April, the Securities and Exchange Commission announced civil fraud charges against Ramapo, the RLDC, St. Lawrence, Troodler, Town Attorney Michael Klein and Deputy Finance Director Nathan Oberman in connection with actions related to RLDC’s bond financings.
St. Lawrence has pled not guilty to the charges. Troodler had pled not guilty but changed his plea on March 7th, according to an announcement by the U.S. Attorney for the Southern District. Troodler, 42, of Bala Cynwyd, PA, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of conspiracy, which carries a maximum sentence of five years in prison. He is scheduled to be sentenced on Sept. 18. According to a report in the Journal News, St. Lawrence’s trial could begin by mid-April. St. Lawrence’s attorney Michael Burke could not be reached for comment by Real Estate In-Depth at press time. He offered no comment on the Troodler guilty plea in the Journal News report.
U.S. Attorney Preet Bharara said of Troodler’s guilty plea, “As we said at the time of his arrest, N. Aaron Troodler defrauded both the citizens of Ramapo and thousands of investors around the country, helping to sell over $150 million of municipal bonds on fabricated financials. Today, Troodler has admitted to committing securities fraud. This guilty plea, in what we believe to be the first municipal bond-related criminal securities fraud prosecution, is a big step in policing and bringing accountability to the $3.7-trillion municipal bond market.”
The federal charges stem from the town’s and Ramapo LDC’s actions in connection with the bond financing for the construction of minor league baseball stadium Provident Bank Park, now operating as Palisades Credit Union Park, and other projects. The stadium is the home of the Rockland Boulders minor league baseball team and first opened in 2011. The RLDC also built the Ramapo Commons condominium project in Spring Valley.
The federal government stated that while the fraud predated the construction of the stadium, the town’s fiscal problems were caused largely by the $58-million total cost of the stadium. “The town paid more than half of that cost, despite the rejection of the town’s guarantee of bonds to pay for construction of the stadium in a town-wide referendum in (August) 2010 and St. Lawrence’s public statements that no public money would be used to pay for the stadium,” the U.S. Attorney’s office stated.
When the RLDC issued $25 million in bonds to build the stadium in 2011, the federal government charged the town inflated the size of its General Fund by including a “fabricated” more than $3.6-million receivable in the General Fund from a land sale from the town to the RLDC.
In addition, St. Lawrence allegedly inflated the General Fund with another false receivable for $3.08 million from 2010 through 2015 in connection with the RLDC’s agreement to purchase property known as “The Hamlets” from the town for $3.08 million, the U.S. Attorney stated in the superseding information That sale never closed because the land turned out to be a habitat for rattlesnakes. According to the U.S. Attorney, “Rather than take the receivable off the town’s books—and reduce the size of the General Fund balance by $3.08 million, thereby creating a negative balance—St. Lawrence claimed the receivable had to do with the RLDC’s purchase of another property from the town that had already taken place. To keep it on the books, St. Lawrence then caused the Town Attorney to tell the town’s auditors over a period of years that the receivable would be paid back within a year, which was required if the receivable was going to stay in the General Fund. Without this fake receivable alone, the town’s General Fund balance would have been negative for years.”
In May 2013 after the Federal Bureau of Investigation conducted a search of Town Hall in connection with the investigation, the federal government charges that Supervisor St. Lawrence inflated a receivable from the Federal Emergency Management Agency to reimburse the town for expenses from Hurricanes Irene and Sandy. St. Lawrence claimed that the town was going to receive $3.145 million from FEMA when the town hadn’t even submitted those claims to FEMA yet, the U.S. Attorney stated. Without St. Lawrence’s inflation of this receivable alone, federal court documents state that the projected General Fund balance for 2012 would have been negative when the town sold bonds in May 2013.
The indictment also alleges that St. Lawrence inflated the General Fund balance by making more than $12 million in transfers from the town’s Ambulance Fund to the General Fund from 2009 to 2014. The group of properties in Ramapo that pays into the Ambulance Fund is different from the group of properties that pays into the General Fund. Under state law, transfers between funds with different tax bases can only be loans. St. Lawrence told the auditors that the two funds had the same tax base to justify the transfers, according to the U.S. Attorney.
According to the indictment and the Superseding Information the federal government charges that St. Lawrence and Troodler misled bond investors that the RLDC was making the payments on its bonds from its operating revenue, specifically proceeds from running the baseball stadium and selling condominiums at a development it had built. “That was important to investors because it led them to believe that the town would not have to pay off the RLDC’s $25 million bonds. It also made the RLDC’s bonds look less risky. The RLDC actually made those payments from money Troodler borrowed from the bank or money he obtained from the town at St. Lawrence’s direction,” the U.S. Attorney’s Office stated.