Bond Trustee Union Bank illegally transferred Funds from 13 Distrct Bonds on order to Call/Collect the 2001 Wastewater Authority Bond.
During the July 7, 2016 Beaumont City Council Meeting Agenda Item 3.C. Interim Finance Director 4th Melana Taylor spoke about the $5 Million illegally removed from November, 2014 CFD 93-1 Bond Fund Accounts to pay the 2001 Wastewater Bond when Called on December 1, 2014.
Taylor stated “So the money moved over from the CFD in the pooled cash, so it didn’t come from Union [Bank], it came straight around from the pooled cash at Citibank.”
Incorrect. The money was removed from 13 different Bond Residual Accounts. Aylward recorded the name of each Bond Fund Account on the General Ledger. The November Bond Fund Accounts show that the money was removed from the Bonds’ Residual Funds.
Citibank is the City of Beaumont’s General Fund and the only bank account the city had at the time. Page 10/16 shows the wire transfers from the Bond Fund Account on November 19th.
Taylor also stated: “.. so instead I recorded it as due back to the City.”
Incorrect. This is not the City’s money, it belongs to CFD 93-1 DISTRICT. The money has to be transferred back and deposited into the Bond Fund Accounts.
Bond Trustee Union Bank, Creditor on the 2001 Wastewater Bond, drained the District Bonds’ Residual Accounts and transferred to money to the City in order to the Call the 2001 Wastewater Bond.
The Bonds’ Sources of Payment for the Bonds Page states that the Trustee may use the Residual Funds to ‘Redeem District Bonds’. The Issuer of the 2001 Wastewater Bond is the Beaumont Utility Authority, not the CFD 93-1 District.
As Bond Trustee; Union Bank illegally transferred Funds from 13 different Municipal Bonds in order to Call a Bond for which Union Bank had a financial interest.
Beaumont City Council Transcript 07/07/2016
25:40 Mayor Lara: Item 3.C. Beaumont Utility Authority Financial Report.
37:45 Melana Taylor: The other thing is the payoff of the bond and it took me a little while, but what happened, what I can tell with the cash flow, is that $5,069,509 increase in cash. That came from the pooled funds held in the CFD funds.
38:00 Melana Taylor: So the money moved over from the CFD in the pooled cash, so it didn’t come from Union [Bank], it came straight around from the pooled cash at Citibank. All it is is a simple transfer on the books, so that’s what happened. Originally it was recorded as income to the wastewater fund, and that’s an incorrect way to record that, so instead I recorded it as due back to the City. Wastewater treatment plant can not keep that money, it wasn’t to be used to pay off the bonds, it needs to be paid back. As long as the cash position for wastewater treatment plant stays positive for the end of 2016; I’m showing that we’re repaying the entire $5 Million back by June 30, 2016 to put the CFD funds back whole and keep the wastewater treatment plant in the right state.
39:00 Melana Taylor: That would leave it with a little less cash that we would hope, but it will leave the other funds fully funded back to its original place, it shouldn’t have been taken in the first place.