Union Bank of California’s Actions as Beaumont’s Bond Trustee
Union Bank Transferred the money to Account # 2420000440 with the Memo: “Urban Logic Consultants. Credit Union Bank of California”
FBI Sacramento Office
2001 Freedom Way
Roseville, CA 95678
Office of the Comptroller of the Currency
1301 McKinney Street, Suite 3450
Houston, Texas 77010
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
As you may have heard; on August 23, 2017 the SEC Issued an Order against Beaumont’s Underwriter, O’Connor Securities, and the Principal : https://www.sec.gov/litigation…
Beaumont’s former City Manager and Principal of GGMS, Alan Kapanicas, has been permanently banned from the bond industry: https://www.sec.gov/litigation…
The Beaumont Finance Authority was Issued a Cease and Desist to stop forging documents. The City has until February 20, 2018 to submit Financial Statements and Bond Certificate of Completion forms that are not forged: https://www.sec.gov/litigation…
James Gregg, former Beaumont Risk Manager, original Principal of GGMS, Principal of ERMAC, with an office located on the 8th floor of Union Bank’s building appears to no longer be involved with the Insurance or Bond industries and is working under ‘Fischer Law Office’ with Mathew D. Fischer.
On March 20, 2017 Union Bank of California N.A. resigned as Beaumont’s Bond Trustee and surrendered all duties and documents to Wilmington Trust: http://www.ci.beaumont.ca.us/d…
It took a collusion to embezzle $400 Million out of the City of Beaumont; but it could have never happened on such a massive scale without Union Bank as Bond Trustee.
Enclosed is the account of how Union Bank of California operated Beaumont’s bond scam. As Bond Trustee, Union Bank violated their Duty of Care multiple times, but establishing the Ghost Account proves the intent to defraud.
Please let me know if you have any questions or need additional information.
Union Bank of California’s Municipal Bond Scam in Beaumont, California:
In the early 1990’s the California Water Quality Control Board was requiring the City of Beaumont, California, to completely replace the sewer plant that had been constructed in 1929 because it had deteriorated beyond repair. (Attachment A)
The City of Beaumont’s sole natural water supply is the Beaumont Basin. Beaumont received permission to construct 2,212 houses predicated on the construction of a new Sewer Plant and a Recycled Water Facility to extend the City’s limited water supply.
In 1993 the City of Beaumont created a Joint Powers Authority (JPA) called the ‘Beaumont Financing Authority’ in order to acquire an $8.5 Million ‘Sewer Enterprise Fund’ Bond to rebuild the sewer plant and add infrastructure to produce Recycled Water. Most of the money was misused and/or embezzled. The Sewer Plant was expanded, but the original sewer wasn’t replaced and the Secondary Treatment Infrastructure needed to produce recycled water was never constructed. (Attachment B)
In 1996 the Beaumont Financing Authority acquired a $7,510,000 Sewer Bond to refinance the 1993 Sewer Bond. Page 10 on the 1996 Bond states that $5,117,481.37 would be used to pay off the 1993 Bond and $1.7 Million would be put into a Construction Fund. (Attachment C)
In 2001 the City created another JPA called the Beaumont Utility Authority to acquire a $9,790,000 Bond for the ‘Wastewater Enterprise Project’ for which Union Bank of California was the ‘Credit Entity’. Page 3 of the 2001 Bond states that the entire amount of the 1996 Sewer Bond, $7,510,000, was still Outstanding. (Attachment D)
In 2002 the City of Beaumont changed their Bond Trustee from BNY Western Trust Company to Union Bank of California. That made Union Bank the Bond Trustee and the Credit Entity to the 2001 Wastewater Bond.
The Bond Trustee is responsible for establishing the bonds’ accounts as directed on the bond. The Issuer/City submits Requisitions to the Trustee for reimbursement. The Requisitions must contain backup documentation to prove the bond money is used for its intended purpose.
Once Union Bank became the Bond Trustee it set up a ‘Ghost Account’ within the 2001 Wastewater Bond Fund Accounts titled ‘Construction Fund’. A ‘ghost account’ is an unauthorized account that is set up to hide accounting transactions that are not legally permitted. There was a Construction Fund Account allocated to the 1996 Sewer Bond, but not the 2001 Wastewater Bond.
Union Bank established multiple ghost accounts for all of Beaumont’s Bonds. For example; the 2007 Series A Bond page 21 directs Union Bank to establish a total of eight (8) accounts. Union Bank established 16 different Accounts. (Attachment E)
Union Bank has released ten (10) Bond Fund Accounts created for the 2001 Wastewater Bond, but none of them are labeled ‘Construction Fund’. (Attachment F)
Establishing multiple/unnecessary accounts facilitates embezzlement. In the limited records I was given I found two (2) instances on the monthly bond accounting statements of embezzlement that appears to be an employee embezzling from Beaumont’s bond fund accounts. (Attachment G)
The City of Beaumont submitted Requisitions to transfer money in to and out of the 2001 Wastewater Bond Construction Fund, but neither Union Bank nor the City has produced a monthly Bond Fund Accounting Statement showing the transactions in the 2001 Wastewater Bond Construction Fund that we know took place because the Construction Fund is listed on the Requisitions the City submitted to Union Bank. (Attachment H)
Every federal municipal bond has a ‘Sources and Uses’ page that gives instruction to the Bond Trustee on establishing the bond fund accounts. The 2001 Wastewater Bond clearly states that the Trustee was only to establish four (4) Bond Fund Accounts: Wastewater Escrow Fund, Wastewater Improvement Fund, Cost of Issuance Fund, and Rate Stabilization Account. (Attachment D)
The City has destroyed most of their documents, so the total amount of money embezzled through the 2001 Wastewater Bond is unknown; but records available show that over $15 Million was paid out through the Construction Fund Ghost Account and $21 Million was paid out of the Wastewater Improvement Fund. The 2001 Wastewater Requisitions that have been released by the City can be found here: http://beaumontgate.org/beaumo…
From 2002 until 2015 when the Securities and Exchange Commission stopped the scam; the City of Beaumont acquired 29 CFD Mello Roos Bonds with a value of over $300 Million, $250 Million of which was ‘New Money’. Virtually all of the money was Embezzled or, at the least, misused. (Attachment I)
Requisitions available show that Union Bank transferred vast amounts of money from Beaumont’s CFD Bonds into the 2001 Wastewater Bond Fund Account #6711674106 with the memo: “Union Bank of California CFD Series 2001A” or transferred the money to Account # 2420000440 with the Memo: “Urban Logic Consultants. Credit Union Bank of California”. (Attachment H)
The Requisitions available show that Union Bank received very few Invoices to justify releasing the money. Most of the Requisitions only included Invoices from the City of Beaumont’s Executive Staff’s personal Businesses requesting payment for ‘consulting’ or ‘engineering’, but no actual brick and mortar construction Invoices.
Union Bank released money to the City of Beaumont to reimburse ‘TUMF’. On April 28, 2014, the Western Riverside Council of Governments won a $42 Million Judgement against the City of Beaumont for stealing the Transportation Uniform Mitigation Fee (TUMF). (Orange County Superior Court Case No. 30-2010-00357976) Beaumont did not qualify for a government interest rate and instead is paying a 7% Interest Rate because, as Judge Chaffee stated in his summary, “Fraud by clear and convincing Evidence.”
Requisitions and documentation released can be found in a jumbled mess on the City of Beaumont’s website laser fiche under CFD 93-1: http://publicdocs.beaumontcare…
Every bond Requisition submitted by the bond Issuer to the bond Trustee requires two signatures of authorization. The Authorized Signatures in Beaumont should have been the Finance Director and the City Manager. Requisitions available show that Beaumont’s former Finance Director rarely signed the Requisitions. Most of Beaumont’s Requisitions were signed by former City Manager Alan Kapanicas, whom the SEC has permanently banned from the bond industry, and Urban Logic Principal/Beaumont Public Works Director Deepak Moorjani, who now claims that he was brought in straight from India and had no idea what he was signing, which is true.
Many times Deepak Moorjani’s name was Forged on Beaumont’s Requisitions or left blank. Union Bank also accepted Requisitions that only had former City Manager Kapanicas’ signature. After Kapanicas left his position with the City, Union Bank accepted Requisitions that contained only the signature of Beaumont’s former Mayor, Brenda Knight. (Attachment J)
Three (3) times Union Bank wired money out of the Bond Fund Accounts to the City of Beaumont to cover the City’s Overdraft General Fund Checking Account. On October 18, 2010, Union Bank wired the City of Beaumont $100,000 when the City was $85,000 Overdrawn. On November 4, 2011 Union Bank transferred $300,000 to cover a $225,000 Overdraft and again on November 21, 2011 Union Bank transferred $100,000 to cover a $50,000 Overdraft. (Attachment K)
On December 15, 2011, the Beaumont Financing Authority Issued 2011 Series A Bond for $12,145,000 using the property values of 163 private citizens in Improvement Area 17B as collateral without the citizens’ approval or knowledge. Union Bank was fully aware of the City’s financial condition. No Financial Statements were included with the Bond.
Area 17B was allocated $1,915,000 from the $2,640,000 CFD 2009 Series B Bond. At that time there were 71 private properties used as collateral without their owners’ consent. The 2011 Series A Bond Uses Page lists $1,917,181.22 allocated to pay off Area 17B’s portion of the 2009 Bond, which was $2,000 more than the original acquisition.
I started auditing the City of Beaumont on November 11, 2012, and filed a Complaint with the S.E.C. against Union Bank of California in March, 2013.
On November 3, 2014, Union Bank of California notified the City of Beaumont that they were pulling their Letter of Credit for the 2001 Wastewater Bond and the City would have to pay Union Bank $7,610,000 by December 1, 2014. (Attachment L)
Beaumont didn’t have $7.6 Million cash. Beaumont only had $1.9 Million in their Checking and $1.8 Million in their California LAIF Account. To pay off themselves; Union Bank’s Corporate Trust Vice President Stephen Boughton and Assistant General Counsel Janis Penton approved a letter from the City of Beaumont requesting residual funds from the Bonds’ Asset Coverage Test “.. be immediately released for facilities.”
On November 19, 2014, Union Bank transferred the City $5,069,508.87 from 13 different CFD Mello Roos Bonds. On November 25, 2014, Beaumont transferred $7,610,000 to Union Bank to pay off the 2001 Wastewater Bond Letter of Credit. No facilities were built.
Because of Union Bank’s bond and construction scam in Beaumont; 20,000 houses have been constructed without following State or Federal building codes and without adequate Infrastructure. Beaumont has no Recycled Water Facility and the City estimates it will cost over $100 Million to get the Sewer Plant up to compliance. Fire Stations and Roadways were never built. All the money was stolen.
Because of Union Bank’s bond scam the Citizens of Beaumont were terrorized. Private property was illegally seized and citizens were driven from their homes if they questioned the City’s activity or if the City wanted their property.
Judy Bingham, who lives across Coopers Creek from Beaumont’s Sewer Plant, was falsely arrested five (5) times because she was exposing the bond scam. In 2005 the Police slammed Mrs. Bingham down on the hood of the police car so hard they dislocated her shoulder and broke her wrist. Mrs. Bingham was Tried and Convicted of ‘Making a Terrorist Threat’ by the Riverside County District Attorney’s Office. (Attachment M)
Not only was Mrs. Bingham targeted because she was uncovering Union Banks’ bond scam; the Bond Requisitions revealed that money from the bonds was used in the City’s plans to confiscate the Bingham property dating back to 2003. Urban Logic Consultants filed a $3 Million SLAPP Suit against Judy Bingham’s group, Beaumont Citizens for Responsible Growth, in an attempt to stop her from disclosing Union Bank’s Bond scam: http://www.bcrg.org/antislapp.html
The General Ledger showed massive payouts to Urban Logic Consultants through the City of Beaumont’s Check Warrants, averaging $500,000/month. I went to Urban Logic Consultants’ address in Temecula. The building was empty. I called Urban Logic’s phone number and a man answered by saying: “Beaumont Wastewater Facility”.
‘Urban Logic Consultants’ as a company didn’t exist.
‘Urban Logic Consultants’ the Corporation had three Principals: Deepak Moorjani/Beaumont Public Works Director, Dave Dillon/Beaumont Economic Development Director, and Ernest Egger/Beaumont Planning Director. The Principals of Urban Logic used their government positions to give Contracts to their own company. The more Bonds the City acquired, the more money there was to Embezzle.
Approximately $400 Million is missing from the City of Beaumont; $250 Million of the missing money was acquired from Federal Municipal Bonds. Moorjani, Dillon, and Egger have been Indicted and their Assets Frozen, but their Assets only account for a small fraction of the money transferred by Union Bank to Union Bank Accounts under the guise of ‘Urban Logic Consultants’.
The January 3, 2016 Beaumont City Council Agenda Item 2 contains the Agreement for Union Bank to Resign as Beaumont’s Bond Trustee and release all Bonds to Wilmington Trust National Association effective January 18, 2017. Union Bank closed all of the Bond Accounts on March 20, 2017: http://www.ci.beaumont.ca.us/d…
If not for the ghost accounts; perhaps Union Bank could plead gross negligence, but the ghost accounts prove intent to defraud.