In re TOWN OF STERLINGTON

 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11069 / June 2, 2022 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 95024 / June 2, 2022 
 
ADMINISTRATIVE PROCEEDING 
File No. 3 - 20873 
 
 
 
In the Matter of 
 
TOWN OF STERLINGTON, 
LOUISIANA 
 
Respondent. 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933 AND SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934, 
MAKING FINDINGS, AND IMPOSING A 
CEASE-AND-DESIST ORDER  
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 
Act”) against the Town of Sterlington, Louisiana (“Sterlington,” the “Town” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
And-Desist Proceedings Pursuant To Section 8A of the Securities Act Of 1933 and Section 21C of 
the Securities Exchange Act of 1934, Making Findings, And Imposing A Cease-And-Desist Order 
(“Order”), as set forth below.   
  

 
 2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
Summary 
1. This matter involves misconduct in the issuance of municipal bonds by Sterlington 
in 2017 and 2018.   
2. On April 27, 2017, Sterlington sold $4 million of water and sewer utility revenue 
bonds (“2017 Bonds”), and on September 28, 2018, it sold a $1.8 million refunding bond (“2018 
Bonds”) (collectively, the “Bonds”).  The Bonds, which were sold in private placements to 
investors, were intended to finance development of a water system for the Town and 
improvements to its existing sewer system.  As required by Louisiana law, the Town applied to 
the Louisiana State Bond Commission (“Bond Commission”) for approval of these bond 
offerings.  The Town submitted applications for the 2017 Bonds and 2018 Bonds to the Bond 
Commission on January 18, 2017 and July 18, 2018, respectively.  In support of each 
application, the Town included false financial projections about the anticipated revenue of the 
Town’s sewer system. The false projections were created by the Town’s municipal advisor with 
the participation and approval of the Town’s then-Mayor.  The false projections misled the Bond 
Commission as to the Town’s ability to cover its debt service for the proposed Bonds.  Bond 
investors were not informed that the Town had obtained Bond Commission approval of the Bonds 
based on false projections, and were not informed of the associated risk that the Bonds may not 
have been duly authorized.  In addition, the Town did not disclose to investors in the 2017 Bonds 
and 2018 Bonds that it had misused over $3 million from earlier bond offerings. 
3. Through this conduct, Sterlington violated Section 17(a) of the Securities Act and 
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 
Respondent 
4. Sterlington, Louisiana is a town with a population of approximately 2600 
citizens located in the central northeastern part of the State of Louisiana.  It is governed by an 
elected mayor and a five member board of aldermen.   
Other Related Individuals and Entity 
5. Vern A. Breland (“Breland”) is a resident of Columbia, LA.  Breland was elected 
the Town’s Mayor in 2006 and resigned from office on October 1, 2018.   
                                                 
1
  The findings herein are made pursuant to Respondent's Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding. 
 
 

 
 3 
6. Aaron B. Fletcher (“Fletcher”) is a resident of Frisco, TX.  He wholly owns Twin 
Spires and is its sole employee and director.   
7. Twin Spires Financial LLC (“Twin Spires”) is a Texas company formed in July 
2015, with its principal place of business in Frisco, TX.  During the relevant period, Twin Spires 
conducted business as a municipal advisor but was not registered with the Commission.   
Facts 
8. Beginning in approximately 2015, Sterlington began municipal projects to upgrade 
its sewer system, purchase the water distribution system for its residents from a third-party, and 
build a water treatment facility.  To fund these projects, Sterlington decided to pursue municipal 
bond offerings to raise the necessary funds.  In June 2015, the Town executed a financial advisory 
agreement with Twin Spires pursuant to which Twin Spires agreed to provide, among other 
municipal advisory services for the Town, advice on various forms of debt financing.  
9. In April 2017, the Town sold the 2017 Bonds ($4 million Utility Revenue Bonds, 
which included $3.5 million Utility Revenue Bonds, Series 2017A (Tax Exempt) and $500,000 
Taxable Utility Revenue Bonds, Series 2017B).  In September 2018, the Town sold the 2018 
Bonds ($1.845 million of Wastewater, Water and Sewer Treatment Utilities Revenue Bonds, 
Series 2018).     
 Overstatement of Sewer Customer and Revenue Projections  
In Application to Louisiana State Bond Commission 
 
10. The Louisiana Constitution
2
 and state law
3
 require political subdivisions, such as 
Sterlington, to obtain the Bond Commission’s written approval before issuing or selling bonds or 
other obligations.  As part of the application, prospective issuers must submit an application to the 
Bond Commission, which includes certain financial and other information.  Certain Bond 
Commission applications for government units or local political subdivisions require revenue and 
expense projections through the maturity of the issuer’s bond debt obligations. 
                                                 
2
 Louisiana Constitution Article VII, Section 8(B) states, “Approval of Bonds. No bonds or other obligations 
shall be issued or sold by the state, directly or through any state board, agency, or commission, or by any political 
subdivision of the state, unless prior written approval of the bond commission is obtained.” 
 
3
 La. R.S. 39:1410.60(A) states:  
 
No parish, municipality, public board, political or public corporation, subdivision, or taxing 
district, and no road or subroad district, school district, sewerage district, drainage or subdrainage 
district, levee district, waterworks or subwaterworks district, irrigation district, road lighting 
district, harbor and terminal district, or any other political subdivision, taxing district, political or 
public corporation, created under or by the constitution and laws of the state shall have authority 
to borrow money, incur debt, or to issue bonds, or other evidences of debt, or to levy taxes, or to 
pledge uncollected taxes or revenues for the payment thereof, where they are authorized by the 
constitution or laws of the state so to do, without the consent and approval of the State Bond 
Commission. 

 
 4 
11. Prior to issuing the Bonds, Sterlington applied to, and obtained the approval, of the 
Bond Commission.  As discussed below, the Town overstated sewer system customers and 
revenue projections in both applications.  The overstatements were made so that the Town could 
meet the minimum debt service coverage ratio required for the Bond Commission to approve the 
bond issuances.  Fletcher and Twin Spires prepared the projections.  Breland, on behalf of the 
Town, reviewed and approved the projections and approved the submission of both applications to 
the Bond Commission.  The Bond Commission was unaware of the overstatements when it 
approved each of the applications and would not have approved the applications if it had been 
aware of them.   
12. In January 2017, Sterlington submitted an application to the Bond Commission, 
seeking approval to issue the 2017 Bonds.  The application included a projection of future sewer 
system customers and revenues.  The Town projected it would have 2,040 sewer customers in 
2018 and sewer system revenue of $864,693 in 2018. The customer projection was a 113% 
increase over Sterlington’s actual 2016 sewer customer number and the revenue projection was a 
139% increase over its 2016 revenue of $361,772.  The 2,040 customer projection for 2018 was 
not based on an analysis of expected additional sewer customers or sewer revenues in 2018.  
Fletcher and Twin Spires “backed into” the projection based on the number of customers the Town 
would need to reach a sewer revenue projection high enough to meet a debt service coverage ratio 
of at least 1.0.  Breland was aware of how Twin Spires and Fletcher calculated the projections.   
13. The Town also misrepresented the historical number of sewer customers for 2016 
and 2017 in an attempt to smooth out the year-to-year trend of sewer customers so the 2018 
projection would appear more realistic.  For example, the financial projections in the Bond 
Commission application represented that the Town had 1,574 sewer customers for 2016.  The 
Town’s December 2016 sewer records showed that the Town actually billed only 960 sewer 
customers.    
14. On February 16, 2017, the Bond Commission approved the Town’s application to 
issue the 2017 Bonds.  In April 2017, the Town received $4 million in proceeds from the sale of 
the 2017 Bonds to three investors.   
15. In July 2018, Sterlington submitted an application to the Bond Commission seeking 
approval to issue the 2018 Bonds.  That application included similarly overstated projections.  The 
Town projected that, in 2019, it would have 2,204 sewer customers and sewer revenues of 
$933,293.  However, as of December 31, 2017, Sterlington had only 1,034 actual sewer customers 
and sewer revenue of only $445,107.  The 2019 projections were similarly “backed into” to meet 
the required debt service coverage ratio and were not based on an analysis as to the number of 
customers or revenue the Town expected to have in 2019.    
16.    On August 16, 2018, the Bond Commission approved the Town’s application to 
issue the 2018 Bonds.  In September 2018, the Town received $1.85 million in proceeds from the 
sale of a 2018 Bond to one investor.    

 
 5 
17. In the closing documents provided to investors in connection with the sale of the 
2017 and 2018 Bonds, the Town represented that the Bonds had been approved by the Bond 
Commission and that the Bonds were validly authorized and issued in accordance with the 
Louisiana Constitution and applicable laws.  These representations were misleading because they 
did not disclose that the approval by the Bond Commission was based, at least in part, on 
intentionally overstated projections.  The misrepresentations were material because the 
misrepresentations to the Bond Commission created the risk that the Bonds could be found not to 
have been validly authorized and issued, which would present a risk to repayment.     
Misuse of Proceeds from Previous Bond Issuances  
 
18. Louisiana state law provides that bond proceeds constitute a trust fund to be used 
exclusively for the purpose for which the bonds are authorized to be issued.
 4
  Use of bond 
proceeds for unauthorized purposes is a violation of state law.  As discussed below, the Town 
misused some of the proceeds from a 2015 bond offering.  This misuse was not disclosed to 
investors in the 2017 and 2018 Bonds.   Similarly, the Town also misused proceeds from the 
2017 Bonds without disclosing this misuse to the 2018 Bond investor.  
19. In 2015, Sterlington issued $500,000 of water treatment and utilities revenue bonds 
and $1.2 million of wastewater and utilities bonds (the “2015 Bonds”).   Pursuant to the bond 
ordinance for the $500,000 bond, the proceeds were to be solely used for the purpose of acquiring, 
constructing and installing a new water treatment facility with infrastructure improvements, 
extensions, modifications and additions to the wastewater and sewer treatment system of 
Sterlington.  The bond ordinance for the $1.2 million bonds stated that the purpose for the bond 
proceeds was for acquiring, constructing and installing improvements, extensions and additions to 
the wastewater and sewer treatment system.  
20. Between January 2016 and August 2017, Breland directed Town employees to 
spend  approximately $432,000 of the 2015 Bond proceeds on expenditures that were contrary to 
the bond ordinances and other investor disclosures for those bond proceeds.  These improper 
expenditures included over $65,000 on police cars and $205,000 on Sterlington’s payroll. 
                                                 
4
   La. R.S. 39:577 (Public Finance: Application of Proceeds) provides, in relevant part: 
 
The proceeds of the sale of bonds issued under the provisions of this Sub-part shall constitute a 
trust fund to be used exclusively for the purpose or purposes for which the bonds are authorized to 
be issued, but the purchaser of the bonds shall not be obliged to see to the application thereof. In 
the event that all or part of the proceeds of the sale of such bonds are no longer needed for the 
purpose for which the bonds were authorized to be issued, the governing authority of the 
subdivision which has issued such bonds may use the proceeds of the sale of such bonds for a 
purpose different from that for which the bonds were originally issued, provided that such new 
purpose is one for which the bonds could have been issued in the original instance and provided 
further that such proposed action shall have been approved by a majority in number and amount of 
the qualified property taxpayers voting at an election held in the manner provided by the 
provisions of this Chapter for authorizing bonds. 
 

 
 6 
21.   Sterlington’s audited financial statements for the year ended December 31, 2016, 
included a finding that Sterlington improperly spent $322,280 of the 2015 Bond proceeds.  In or 
about July 2017, the Town’s auditor notified the Town of this finding.  On August 29, 2017, 
Breland’s response to the finding, on behalf of the Town, was that the Town planned to repay all 
the funds by December 31, 2017.  Sterlington’s records show that only $39,800 was repaid by the 
end of the year and the remaining $282,480 to be repaid never occurred.  In addition, from January 
1, 2017 through July 31, 2018, Breland directed the misuse of an additional $110,367 from the 
2015 Bond proceeds.  As a result, Sterlington spent a total of $432,647 on items inconsistent with 
the stated purposes for the 2015 Bonds.  
22. Prior to, and after Sterlington’s response to the audit finding, Sterlington, at 
Breland’s direction, also used the proceeds of the 2017 Bonds contrary to the stated purpose in the 
bond ordinance and other investor disclosures.  The stated purpose of the 2017 Bonds was to  
“[construct] and [acquire] utility improvements, extensions and replacements to the System, 
including utility improvements to the Issuer’s new sports complex and other municipality owned 
projects, including appurtenant equipment, accessories and additions to such works of public 
improvement for the Issuer....”  
23. Between June 16, 2017 and September 10, 2018, Sterlington, at Breland’s direction, 
spent $2,685,456 of the 2017 Bond proceeds, including $2,176,506 on its sports complex and 
$362,184 on legal fees.  These uses were inconsistent with the stated purposes for the 2017 Bonds.   
24. In documents provided to investors in  both the 2017 and 2018 Bonds, the Town 
made representations as to the intended use of bond proceeds.  Those representations were 
misleading in light of the omitted information about the Town’s misuse of proceeds from recent 
bond offerings.  The omissions were material because the Bonds were revenue bonds, intended to 
improve revenue producing water and sewer systems.  The revenues from these systems were 
intended to be the source of repayment for the Bonds.  The Town’s prior misuse of proceeds 
presented a risk that the Town would misuse proceeds in the 2017 and 2018 Bonds.  The use of 
proceeds for non-Bond purposes presented a risk to the successful completion and operation of the 
projects and a risk to repayment.  
 Legal Discussion 
25. Section 10(b) of the Exchange Act and Rule 10b-5(a) promulgated thereunder make 
it unlawful to “directly or indirectly ... employ any device, scheme, or artifice to defraud ... in 
connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5(a). Section 10(b) of 
the Exchange Act and Rule 10b-5(b) promulgated thereunder make it unlawful to “directly or 
indirectly ... make any untrue statement of a material fact or to omit to state a material fact 
necessary in order to make the statements made, in the light of the circumstances under which they 
were made, not misleading ...in connection with the purchase or sale of any security.” 17 C.F.R. § 
240.10b-5(b). Section 10(b) of the Exchange Act and Rule 10b-5(c) promulgated thereunder make 
it unlawful to “directly or indirectly ... engage in any act, practice, or course of business which 
operates or would operate as a fraud or deceit upon any person ... in connection with the purchase 
or sale of any security.” 17 C.F.R. § 240.10b-5(c). 

 
 7 
26. Section 17(a)(1) of the Securities Act makes it unlawful “in the offer or sale of any 
securities ... directly or indirectly ... to employ any device, scheme, or artifice to defraud.” 15 
U.S.C. § 77q(a)(1). Section 17(a)(2) of the Securities Act makes it unlawful “in the offer or sale of 
any securities ... directly or indirectly ... to obtain money or property by means of any untrue 
statement of a material fact or any omission to state a material fact necessary in order to make the  
statements made, in light of the circumstances under which they were made, not misleading.” 15 
U.S.C. § 77q(a)(2). Section 17(a)(3) of the Securities Act makes it unlawful “in the offer or sale of 
any securities ... directly or indirectly ... to engage in any transaction, practice, or course of 
business which operates or would operate as a fraud or deceit upon the purchaser.” 15 U.S.C. § 
77q(a)(3).   
 
27. A statement or omission is material if there is a substantial likelihood that a 
reasonable investor would consider it important in making an investment decision. Basic Inc. v. 
Levinson, 485 U.S. 224, 231-32 (1988). 
 
28. Violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as well 
as violations of Section 17(a)(1) of the Securities Act, require proof of scienter. Aaron v. SEC, 446 
U.S. 680, 701-02 (1980). Scienter can be satisfied through recklessness. SEC v. Dain Rauscher, 
Inc., 254 F.3d 852, 856 (9th Cir. 2001). “Reckless conduct is conduct that consists of a highly 
unreasonable act, or omission, that is an ‘extreme departure from the standards of ordinary care, 
and which presents a danger of misleading buyers or sellers that is either known to the defendant or 
is so obvious that the actor must have been aware of it.’” Id.  Negligence is sufficient to establish 
violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act.  See Aaron, 446 U.S. at 696-97. 
 
29. As a result of the conduct described above, Sterlington violated Section 17(a) of the 
Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 
 
Respondent’s Remedial Efforts 
 
30. In determining to accept the Offer, the Commission considered remedial acts 
undertaken by the Town relating to improvements to its internal controls and establishment of a 
financial oversight committee charged with, among other things, overseeing and approving any 
borrowing or applications for funds, and approving disbursements.   
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Sterlington’s Offer. 
 
 Accordingly, it is hereby ORDERED that, pursuant to Section 8A of the Securities Act and 
Section 21C of the Exchange Act, Respondent Sterlington cease and desist from committing or  

 
 8 
causing any violations and any future violations of Section 17(a) of the Securities Act and Section 
10(b) of the Exchange Act and Rule 10b-5 thereunder. 
 
  
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 
 
 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11069 / June 2, 2022 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 95024 / June 2, 2022 

 

ADMINISTRATIVE PROCEEDING 

File No. 3 - 20873 

 

 

 

In the Matter of 

 

TOWN OF STERLINGTON, 

LOUISIANA 

 

Respondent. 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933 AND SECTION 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

MAKING FINDINGS, AND IMPOSING A 

CEASE-AND-DESIST ORDER  

  

I. 
 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”) against the Town of Sterlington, Louisiana (“Sterlington,” the “Town” or “Respondent”).  

 

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

And-Desist Proceedings Pursuant To Section 8A of the Securities Act Of 1933 and Section 21C of 

the Securities Exchange Act of 1934, Making Findings, And Imposing A Cease-And-Desist Order 

(“Order”), as set forth below.   

  



 

 2 

III. 
 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

Summary 

1. This matter involves misconduct in the issuance of municipal bonds by Sterlington 

in 2017 and 2018.   

2. On April 27, 2017, Sterlington sold $4 million of water and sewer utility revenue 

bonds (“2017 Bonds”), and on September 28, 2018, it sold a $1.8 million refunding bond (“2018 

Bonds”) (collectively, the “Bonds”).  The Bonds, which were sold in private placements to 

investors, were intended to finance development of a water system for the Town and 

improvements to its existing sewer system.  As required by Louisiana law, the Town applied to 

the Louisiana State Bond Commission (“Bond Commission”) for approval of these bond 

offerings.  The Town submitted applications for the 2017 Bonds and 2018 Bonds to the Bond 

Commission on January 18, 2017 and July 18, 2018, respectively.  In support of each 

application, the Town included false financial projections about the anticipated revenue of the 

Town’s sewer system. The false projections were created by the Town’s municipal advisor with 

the participation and approval of the Town’s then-Mayor.  The false projections misled the Bond 

Commission as to the Town’s ability to cover its debt service for the proposed Bonds.  Bond 

investors were not informed that the Town had obtained Bond Commission approval of the Bonds 

based on false projections, and were not informed of the associated risk that the Bonds may not 

have been duly authorized.  In addition, the Town did not disclose to investors in the 2017 Bonds 

and 2018 Bonds that it had misused over $3 million from earlier bond offerings. 

3. Through this conduct, Sterlington violated Section 17(a) of the Securities Act and 

Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

Respondent 

4. Sterlington, Louisiana is a town with a population of approximately 2600 

citizens located in the central northeastern part of the State of Louisiana.  It is governed by an 

elected mayor and a five member board of aldermen.   

Other Related Individuals and Entity 

5. Vern A. Breland (“Breland”) is a resident of Columbia, LA.  Breland was elected 

the Town’s Mayor in 2006 and resigned from office on October 1, 2018.   

                                                 
1  The findings herein are made pursuant to Respondent's Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 

 

 



 

 3 

6. Aaron B. Fletcher (“Fletcher”) is a resident of Frisco, TX.  He wholly owns Twin 

Spires and is its sole employee and director.   

7. Twin Spires Financial LLC (“Twin Spires”) is a Texas company formed in July 

2015, with its principal place of business in Frisco, TX.  During the relevant period, Twin Spires 

conducted business as a municipal advisor but was not registered with the Commission.   

Facts 

8. Beginning in approximately 2015, Sterlington began municipal projects to upgrade 

its sewer system, purchase the water distribution system for its residents from a third-party, and 

build a water treatment facility.  To fund these projects, Sterlington decided to pursue municipal 

bond offerings to raise the necessary funds.  In June 2015, the Town executed a financial advisory 

agreement with Twin Spires pursuant to which Twin Spires agreed to provide, among other 

municipal advisory services for the Town, advice on various forms of debt financing.  

9. In April 2017, the Town sold the 2017 Bonds ($4 million Utility Revenue Bonds, 

which included $3.5 million Utility Revenue Bonds, Series 2017A (Tax Exempt) and $500,000 

Taxable Utility Revenue Bonds, Series 2017B).  In September 2018, the Town sold the 2018 

Bonds ($1.845 million of Wastewater, Water and Sewer Treatment Utilities Revenue Bonds, 

Series 2018).     

 Overstatement of Sewer Customer and Revenue Projections  

In Application to Louisiana State Bond Commission 

 

10. The Louisiana Constitution2 and state law3 require political subdivisions, such as 

Sterlington, to obtain the Bond Commission’s written approval before issuing or selling bonds or 

other obligations.  As part of the application, prospective issuers must submit an application to the 

Bond Commission, which includes certain financial and other information.  Certain Bond 

Commission applications for government units or local political subdivisions require revenue and 

expense projections through the maturity of the issuer’s bond debt obligations. 

                                                 
2 Louisiana Constitution Article VII, Section 8(B) states, “Approval of Bonds. No bonds or other obligations 

shall be issued or sold by the state, directly or through any state board, agency, or commission, or by any political 

subdivision of the state, unless prior written approval of the bond commission is obtained.” 

 
3 La. R.S. 39:1410.60(A) states:  

 

No parish, municipality, public board, political or public corporation, subdivision, or taxing 

district, and no road or subroad district, school district, sewerage district, drainage or subdrainage 

district, levee district, waterworks or subwaterworks district, irrigation district, road lighting 

district, harbor and terminal district, or any other political subdivision, taxing district, political or 

public corporation, created under or by the constitution and laws of the state shall have authority 

to borrow money, incur debt, or to issue bonds, or other evidences of debt, or to levy taxes, or to 

pledge uncollected taxes or revenues for the payment thereof, where they are authorized by the 

constitution or laws of the state so to do, without the consent and approval of the State Bond 

Commission. 



 

 4 

11. Prior to issuing the Bonds, Sterlington applied to, and obtained the approval, of the 

Bond Commission.  As discussed below, the Town overstated sewer system customers and 

revenue projections in both applications.  The overstatements were made so that the Town could 

meet the minimum debt service coverage ratio required for the Bond Commission to approve the 

bond issuances.  Fletcher and Twin Spires prepared the projections.  Breland, on behalf of the 

Town, reviewed and approved the projections and approved the submission of both applications to 

the Bond Commission.  The Bond Commission was unaware of the overstatements when it 

approved each of the applications and would not have approved the applications if it had been 

aware of them.   

12. In January 2017, Sterlington submitted an application to the Bond Commission, 

seeking approval to issue the 2017 Bonds.  The application included a projection of future sewer 

system customers and revenues.  The Town projected it would have 2,040 sewer customers in 

2018 and sewer system revenue of $864,693 in 2018. The customer projection was a 113% 

increase over Sterlington’s actual 2016 sewer customer number and the revenue projection was a 

139% increase over its 2016 revenue of $361,772.  The 2,040 customer projection for 2018 was 

not based on an analysis of expected additional sewer customers or sewer revenues in 2018.  

Fletcher and Twin Spires “backed into” the projection based on the number of customers the Town 

would need to reach a sewer revenue projection high enough to meet a debt service coverage ratio 

of at least 1.0.  Breland was aware of how Twin Spires and Fletcher calculated the projections.   

13. The Town also misrepresented the historical number of sewer customers for 2016 

and 2017 in an attempt to smooth out the year-to-year trend of sewer customers so the 2018 

projection would appear more realistic.  For example, the financial projections in the Bond 

Commission application represented that the Town had 1,574 sewer customers for 2016.  The 

Town’s December 2016 sewer records showed that the Town actually billed only 960 sewer 

customers.    

14. On February 16, 2017, the Bond Commission approved the Town’s application to 

issue the 2017 Bonds.  In April 2017, the Town received $4 million in proceeds from the sale of 

the 2017 Bonds to three investors.   

15. In July 2018, Sterlington submitted an application to the Bond Commission seeking 

approval to issue the 2018 Bonds.  That application included similarly overstated projections.  The 

Town projected that, in 2019, it would have 2,204 sewer customers and sewer revenues of 

$933,293.  However, as of December 31, 2017, Sterlington had only 1,034 actual sewer customers 

and sewer revenue of only $445,107.  The 2019 projections were similarly “backed into” to meet 

the required debt service coverage ratio and were not based on an analysis as to the number of 

customers or revenue the Town expected to have in 2019.    

16.    On August 16, 2018, the Bond Commission approved the Town’s application to 

issue the 2018 Bonds.  In September 2018, the Town received $1.85 million in proceeds from the 

sale of a 2018 Bond to one investor.    



 

 5 

17. In the closing documents provided to investors in connection with the sale of the 

2017 and 2018 Bonds, the Town represented that the Bonds had been approved by the Bond 

Commission and that the Bonds were validly authorized and issued in accordance with the 

Louisiana Constitution and applicable laws.  These representations were misleading because they 

did not disclose that the approval by the Bond Commission was based, at least in part, on 

intentionally overstated projections.  The misrepresentations were material because the 

misrepresentations to the Bond Commission created the risk that the Bonds could be found not to 

have been validly authorized and issued, which would present a risk to repayment.     

Misuse of Proceeds from Previous Bond Issuances  

 

18. Louisiana state law provides that bond proceeds constitute a trust fund to be used 

exclusively for the purpose for which the bonds are authorized to be issued. 4  Use of bond 

proceeds for unauthorized purposes is a violation of state law.  As discussed below, the Town 

misused some of the proceeds from a 2015 bond offering.  This misuse was not disclosed to 

investors in the 2017 and 2018 Bonds.   Similarly, the Town also misused proceeds from the 

2017 Bonds without disclosing this misuse to the 2018 Bond investor.  

19. In 2015, Sterlington issued $500,000 of water treatment and utilities revenue bonds 

and $1.2 million of wastewater and utilities bonds (the “2015 Bonds”).   Pursuant to the bond 

ordinance for the $500,000 bond, the proceeds were to be solely used for the purpose of acquiring, 

constructing and installing a new water treatment facility with infrastructure improvements, 

extensions, modifications and additions to the wastewater and sewer treatment system of 

Sterlington.  The bond ordinance for the $1.2 million bonds stated that the purpose for the bond 

proceeds was for acquiring, constructing and installing improvements, extensions and additions to 

the wastewater and sewer treatment system.  

20. Between January 2016 and August 2017, Breland directed Town employees to 

spend  approximately $432,000 of the 2015 Bond proceeds on expenditures that were contrary to 

the bond ordinances and other investor disclosures for those bond proceeds.  These improper 

expenditures included over $65,000 on police cars and $205,000 on Sterlington’s payroll. 

                                                 
4   La. R.S. 39:577 (Public Finance: Application of Proceeds) provides, in relevant part: 

 

The proceeds of the sale of bonds issued under the provisions of this Sub-part shall constitute a 

trust fund to be used exclusively for the purpose or purposes for which the bonds are authorized to 

be issued, but the purchaser of the bonds shall not be obliged to see to the application thereof. In 

the event that all or part of the proceeds of the sale of such bonds are no longer needed for the 

purpose for which the bonds were authorized to be issued, the governing authority of the 

subdivision which has issued such bonds may use the proceeds of the sale of such bonds for a 

purpose different from that for which the bonds were originally issued, provided that such new 

purpose is one for which the bonds could have been issued in the original instance and provided 

further that such proposed action shall have been approved by a majority in number and amount of 

the qualified property taxpayers voting at an election held in the manner provided by the 

provisions of this Chapter for authorizing bonds. 

 



 

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21.   Sterlington’s audited financial statements for the year ended December 31, 2016, 

included a finding that Sterlington improperly spent $322,280 of the 2015 Bond proceeds.  In or 

about July 2017, the Town’s auditor notified the Town of this finding.  On August 29, 2017, 

Breland’s response to the finding, on behalf of the Town, was that the Town planned to repay all 

the funds by December 31, 2017.  Sterlington’s records show that only $39,800 was repaid by the 

end of the year and the remaining $282,480 to be repaid never occurred.  In addition, from January 

1, 2017 through July 31, 2018, Breland directed the misuse of an additional $110,367 from the 

2015 Bond proceeds.  As a result, Sterlington spent a total of $432,647 on items inconsistent with 

the stated purposes for the 2015 Bonds.  

22. Prior to, and after Sterlington’s response to the audit finding, Sterlington, at 

Breland’s direction, also used the proceeds of the 2017 Bonds contrary to the stated purpose in the 

bond ordinance and other investor disclosures.  The stated purpose of the 2017 Bonds was to  

“[construct] and [acquire] utility improvements, extensions and replacements to the System, 

including utility improvements to the Issuer’s new sports complex and other municipality owned 

projects, including appurtenant equipment, accessories and additions to such works of public 

improvement for the Issuer….”  

23. Between June 16, 2017 and September 10, 2018, Sterlington, at Breland’s direction, 

spent $2,685,456 of the 2017 Bond proceeds, including $2,176,506 on its sports complex and 

$362,184 on legal fees.  These uses were inconsistent with the stated purposes for the 2017 Bonds.   

24. In documents provided to investors in  both the 2017 and 2018 Bonds, the Town 

made representations as to the intended use of bond proceeds.  Those representations were 

misleading in light of the omitted information about the Town’s misuse of proceeds from recent 

bond offerings.  The omissions were material because the Bonds were revenue bonds, intended to 

improve revenue producing water and sewer systems.  The revenues from these systems were 

intended to be the source of repayment for the Bonds.  The Town’s prior misuse of proceeds 

presented a risk that the Town would misuse proceeds in the 2017 and 2018 Bonds.  The use of 

proceeds for non-Bond purposes presented a risk to the successful completion and operation of the 

projects and a risk to repayment.  

 Legal Discussion 

25. Section 10(b) of the Exchange Act and Rule 10b-5(a) promulgated thereunder make 

it unlawful to “directly or indirectly … employ any device, scheme, or artifice to defraud … in 

connection with the purchase or sale of any security.” 17 C.F.R. § 240.10b-5(a). Section 10(b) of 

the Exchange Act and Rule 10b-5(b) promulgated thereunder make it unlawful to “directly or 

indirectly … make any untrue statement of a material fact or to omit to state a material fact 

necessary in order to make the statements made, in the light of the circumstances under which they 

were made, not misleading …in connection with the purchase or sale of any security.” 17 C.F.R. § 

240.10b-5(b). Section 10(b) of the Exchange Act and Rule 10b-5(c) promulgated thereunder make 

it unlawful to “directly or indirectly … engage in any act, practice, or course of business which 

operates or would operate as a fraud or deceit upon any person … in connection with the purchase 

or sale of any security.” 17 C.F.R. § 240.10b-5(c). 



 

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26. Section 17(a)(1) of the Securities Act makes it unlawful “in the offer or sale of any 

securities … directly or indirectly … to employ any device, scheme, or artifice to defraud.” 15 

U.S.C. § 77q(a)(1). Section 17(a)(2) of the Securities Act makes it unlawful “in the offer or sale of 

any securities … directly or indirectly … to obtain money or property by means of any untrue 

statement of a material fact or any omission to state a material fact necessary in order to make the  

statements made, in light of the circumstances under which they were made, not misleading.” 15 

U.S.C. § 77q(a)(2). Section 17(a)(3) of the Securities Act makes it unlawful “in the offer or sale of 

any securities … directly or indirectly … to engage in any transaction, practice, or course of 

business which operates or would operate as a fraud or deceit upon the purchaser.” 15 U.S.C. § 

77q(a)(3).   

 

27. A statement or omission is material if there is a substantial likelihood that a 

reasonable investor would consider it important in making an investment decision. Basic Inc. v. 

Levinson, 485 U.S. 224, 231-32 (1988). 

 

28. Violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, as well 

as violations of Section 17(a)(1) of the Securities Act, require proof of scienter. Aaron v. SEC, 446 

U.S. 680, 701-02 (1980). Scienter can be satisfied through recklessness. SEC v. Dain Rauscher, 

Inc., 254 F.3d 852, 856 (9th Cir. 2001). “Reckless conduct is conduct that consists of a highly 

unreasonable act, or omission, that is an ‘extreme departure from the standards of ordinary care, 

and which presents a danger of misleading buyers or sellers that is either known to the defendant or 

is so obvious that the actor must have been aware of it.’” Id.  Negligence is sufficient to establish 

violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act.  See Aaron, 446 U.S. at 696-97. 

 

29. As a result of the conduct described above, Sterlington violated Section 17(a) of the 

Securities Act, and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. 

 

Respondent’s Remedial Efforts 

 

30. In determining to accept the Offer, the Commission considered remedial acts 

undertaken by the Town relating to improvements to its internal controls and establishment of a 

financial oversight committee charged with, among other things, overseeing and approving any 

borrowing or applications for funds, and approving disbursements.   

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Sterlington’s Offer. 

 

 Accordingly, it is hereby ORDERED that, pursuant to Section 8A of the Securities Act and 

Section 21C of the Exchange Act, Respondent Sterlington cease and desist from committing or  



 

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causing any violations and any future violations of Section 17(a) of the Securities Act and Section 

10(b) of the Exchange Act and Rule 10b-5 thereunder. 

 

  

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary