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Commentary By Steven Malanga

A Town's 'Creative Accounting' Leads to a Fraud Conviction

Cities, Economics, Governance Tax & Budget, Tax & Budget

Such misrepresentation is common in municipal bookkeeping. Rarely do officials answer for it.

For years, local governments have had little to fear from using dubious accounting practices to shore up their finances on paper. Sure, critics could scream: In 2015 Paul Volcker, a former chairman of the Federal Reserve, sounded the alarm about states and cities that used slippery accounting to “obscure their true financial position, shift current costs onto future generations, and push off the need to make hard choices.” But rarely have officials been made to answer for their deception.

Until now. Last month a jury convicted Christopher St. Lawrence, the former town supervisor of Ramapo, N.Y., of federal charges including securities fraud in connection with the financing of a minor-league baseball stadium. Prosecutors have frequently jailed local officials for accepting bribes or stealing money. But Mr. St. Lawrence, who could serve prison time and is planning to appeal, is the first to face criminal charges for cooking a municipality’s books. His conviction, part of an escalating federal enforcement effort, should be a wake-up call for towns, cities and states nationwide.

In 2010 residents of Ramapo voted 67% to 33% against using public money to build a new stadium for the Rockland Boulders. So Mr. St. Lawrence concocted an elaborate plan to have the town’s economic-development agency float debt for the stadium. But the agency couldn’t actually finance all the debt: Mr. St. Lawrence was funneling money to it from town accounts. Then he tried to hide Ramapo’s weakening finances.

After assuring a bond analyst in 2013 that the town’s budget was sound, Mr. St. Lawrence was caught on tape telling employees....

Read the entire piece here at The Wall Street Journal


Steven Malanga is the George M. Yeager Fellow at the Manhattan Institute and a senior editor at City Journal.

This piece originally appeared in The Wall Street Journal