Today CEI asked the Securities and Exchange Commission to investigate these activities as possible securities fraud. Federal law prohibits deceiving investors through untrue material facts or material omissions. The municipalities claim to the court that they are able to predict these sea level changes. If that is true, then they are deceiving investors. The SEC’s mission is to protect investors from such false statements.
A few examples of the conflicting statements:
- The City of San Francisco to bond investors: “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.” But to the court, the city predicts “0.3 to as much as 0.8 feet of additional sea level rise.”
- The City of Oakland to bond investors: “The City is unable to predict when seismic events, fires or other natural events, such as sea rise or other impacts of climate change or flooding from a major storm, could occur, when they may occur.” But to the court, the city predicts “66 inches of sea level rise.”
- The County of San Mateo to bond investors: “County 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.” But to the court, the county states: “The County anticipates and is planning for significant sea level rise.”
- The County of Santa Cruz to bond investors states that “may be subject to unpredictable climatic conditions, such as flood.” But to the court, the county states that there is a “98% chance that the County experiences a devastating three-foot flood before the year 2050.”
There are two possible reasons why these municipalities have told the courts different statements than investors. First the municipalities may be trying to get more money from bonds then they would be able to get if they were honest about their true beliefs. For instance, the City of Oakland predicts the costs of “between $22 and $38 billion.” Would the city even be solvent trying to pay those costs? No investor would give their money to a city which expects not to be able to pay them back. If the municipalities were forced to explain what they claim are the expected impacts of climate change to their budget, they would no longer be able to raise as much money from bonds.
The second possible reason is that these municipalities are actually lying to the courts instead of investors by fabricating their predictions of sea level rise. Or perhaps they’re misrepresenting things to both investors and the courts.
Regardless, we hope the SEC can get to the bottom of this.
>>>Read CEI’s letter to LeeAnn Ghazil Gaunt, Chief of the Securities and Exchange Commission’s Public Finance Abuse Unit, here.