Securities and Exchange Commission v Ruben James Rojas Complaint

COMPLAINT

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JOHN S. YUN (Cal. Bar No. 112260)
  E-mail:  [email protected]
JASON H. LEE (Cal. Bar No. 253140)
  E-mail:  [email protected]

Attorneys for Plaintiff
Securities and Exchange Commission
Erin E. Schneider, Regional Director
Monique C. Winkler, Associate Regional Director
44 Montgomery Street, Suite 2800
San Francisco, California 94104
Telephone:  (415) 705-2500
Facsimile:  (415) 705-2501

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
RUBEN JAMES ROJAS,
Defendant.

 Case No.:

COMPLAINT

COMPLAINT
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Plaintiff Securities and Exchange Commission (“Commission”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331
and Sections 20(b), 20(d), and 22(a) of the Securities Act of 1933 (“Securities Act”)
[15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and Sections 21(d), 21(e), and 27 of the
Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d), 78u(e), and
78aa].
2. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(2),
Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], and Section 27 of the
Exchange Act [15 U.S.C. § 78aa].  Certain of the events constituting or giving rise to
the alleged violations of the federal securities laws occurred in the Central District of
California.  In addition, the defendant resides in this district.
SUMMARY OF THE ACTION
3. Under the direction of defendant Ruben James Rojas (“Rojas”),
the Montebello Unified School District’s (“Montebello” or the “District”) Chief
Business Officer, Montebello sold $100 million in  municipal bonds to public
investors in late December 2016 in  violation of the federal securities
laws.  Specifically, Rojas and Montebello concealed from investors in the offering
that Montebello’s independent auditor had raised concerns about potential fraud and
internal controls problems at the District.
4. Beginning in mid-November 2016, over a month before the final bond
sale, a senior Montebello accounting officer told Montebello’s independent auditor
(the “Audit Firm”) about allegations of fraud and accounting improprieties at the
District. The Audit Firm requested information regarding these allegations, but
Montebello and Rojas failed to provide timely responses, thereby impeding the
audit’s timely completion. The Audit Firm repeatedly warned Rojas,
other Montebello officials and Montebello’s Board of Education (“Board”) that the
Audit Firm could not complete its pending audit for fiscal year 2016 without

COMPLAINT
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conducting further analyses of the fraud allegations and the District’s accounting
controls.
5. Rather than authorizing the Audit Firm to conduct the necessary
analyses and audit procedures, Montebello and Rojas terminated the Audit Firm on or
soon after a Montebello Board meeting on December 15, 2016.  This
termination foreclosed the Audit Firm’s performance of additional audit procedures
and prevented the Audit Firm from completing its fiscal year 2016 audit of
Montebello’s financial statements.
6. Montebello and Rojas concealed the Audit Firm’s termination
and concerns from investors in the December 2016 bond offering.  Instead of
disclosing the Audit firm’s termination and concerns, Montebello’s bond offering
documents deceptively stated only that the Audit Firm “serves as   independent auditor
to the District” and attached the fiscal year 2015 audited financial statements from the
Audit Firm, with a clean audit opinion by the Audit Firm for the previous fiscal
year.  These statements and omissions gave investors the false impression that the
fiscal year 2016 audit, and a clean opinion for that audit, would be forthcoming.
7. Rojas rendered the bond offering documents materially misleading and
carried out a fraudulent scheme to conceal significant issues raised by the Audit
Firm in violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder, as well as Sections 17(a)(1) and 17(a)(3) of the Securities
Act.  Rojas also aided and abetted Montebello’s violations of Section 10(b) of the
Exchange Act, Rule 10b-5 thereunder, and Section 17(a) of the Securities
Act.  Additionally, Rojas is liable for each of Montebello’s Exchange Act violations
as a control person of the District.
DEFENDANT
8. Ruben James Rojas, age 56, is a resident of Corona, California.  From
July 2015 to March 2017, he served as the Chief Business Officer of Montebello.
Rojas oversaw and managed Montebello’s $100 million bond offering, including the

COMPLAINT
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preparation of the offering documents for the bonds, which included a Preliminary
Official Statement (“POS”), a Supplemented Preliminary Official Statement
(“Supplemented POS”), and a Final Official Statement (“FOS”) (collectively,
“Offering Documents”).  Rojas was the primary contact for the bond and disclosure
counsel and municipal advisor retained by Montebello to assist with the bond
offering.  He was also the primary person through which bond and disclosure
counsel, the municipal advisor, the underwriters, and underwriters’ counsel received
information for inclusion in the Offering Documents for the bonds.  Rojas received,
reviewed and provided edits for multiple drafts of the Offering Documents, and was
the only Montebello staff member whose approval was required before any of the
three Offering Documents could be disseminated to investors.  Rojas provided such
approval for the dissemination of each document.  Montebello placed Rojas on
temporary paid administrative leave for one month beginning in late summer of 2016,
and ultimately terminated his contract in March 2017.
RELEVANT ENTITIES
9. Montebello Unified School District is a California public school
district that was established in 1936.  Its territory spans multiple cities located in
eastern Los Angeles County, California.  It is governed by a five-member elected
Board of Education.  Using email, Montebello disseminated the POS for the $100
million bond offering to investors on December 7, 2016, disseminated the
Supplemented POS to investors on December 19, 2016, and disseminated the FOS to
investors on December 21, 2016.  Montebello posted the FOS on the Municipal
Securities Rulemaking Board’s Electronic Municipal Market Access website, an
online repository that provides public access to municipal securities disclosures and
related information.  After the bond offering closed on December 28, 2016,
Montebello received the cash proceeds generated by the offering, less fees paid to the
professional firms which provided services in connection with the deal.
10. The   Audit Firm is an independent auditing firm with its principal place

COMPLAINT
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of business in Los Angeles, California.  It has been registered with the Public
Company Accounting Oversight Board since 2003.  The Audit Firm served as
Montebello’s independent auditor and audited the District’s financial statements for
fiscal years 2014 and 2015.  The Audit Firm also served as Montebello’s independent
auditor for fiscal year 2016, ending on June 30, 2016, but was fired before it could
complete its audit for that year.
FACTUAL ALLEGATIONS
Montebello Retains the Audit Firm for its Fiscal Year 2016 Audit
11. On March 3, 2016, Montebello’s Board approved the Audit Firm’s
retention to audit the District’s fiscal year 2016 financial statements.  Rojas signed
the Engagement Letter on behalf of Montebello on March 12, 2016.  Under the
requirements of Section 41020 of the California Education Code, the completed fiscal
year 2016 audited financial statements were due by December 15, 2016.
12. The Engagement Letter specified an audit fee of $91,500, subject to the
need by the Audit Firm to spend additional time due to Montebello’s failure to
facilitate the audit by making information available or due to “unexpected
circumstances.”  The Engagement Letter made Montebello responsible for providing
the Audit Firm with the access, information and representation letters necessary to
complete the audit in a timely manner. The Engagement Letter also provided that the
audit would be conducted in accordance with Generally Accepted Auditing Standards
(“GAAS”), Government Auditing Standards (“GAS”), the Standards and Procedures
for Audit of California K-12 Local Educational Agencies 2015-2016, as well as
certain specified United States and California requirements.  The Engagement Letter
further stated that the Audit Firm would review Montebello’s accounting controls and
would disclose weaknesses in Montebello’s accounting controls in its audit report.
The Engagement Letter therefore described the work that the Audit Firm had to
perform to provide a clean opinion for the District’s fiscal year 2016 audited financial
statements.

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The Audit Firm Repeatedly Raises Concerns About Fraud And Internal
Controls Issues
13. Shortly before or during a visit to Montebello’s offices in mid-
November 2016, the lead partner and a manager for the Audit Firm learned that Rojas
had been placed on administrative leave during the month of September 2016 due to
allegations of improper conduct.  At the office visit, a senior Montebello manager
also informed the Audit Firm that there were certain accounting areas, such as
contract authorization, procurement, and information technology, as well as
management integrity, which the Audit Firm should look into.  In light of this
conversation, the Audit Firm began seeking additional documents and information
regarding the allegations of misconduct and the District’s accounting controls.
14. On December 1, 2016, the Audit Firm sent a letter to Montebello noting
that it had been made aware of allegations of improprieties at the District as well as
questions concerning Rojas’s qualifications and integrity, which could impact the
firm’s ability to complete its pending audit of Montebello’s fiscal year 2016 financial
statements.  Additionally, the Audit Firm made the highly unusual request for a
closed session meeting with Montebello’s Board to discuss the Firm’s concerns.
Montebello’s Superintendent of Schools (“Superintendent”) and Board president
received a copy of the letter on December 2, 2016.  By the morning of December 7,
2016, Rojas had also received a copy of the letter and discussed it with the District’s
Superintendent.
15. In the late evening of December 7, 2016, Montebello issued the POS to
investors, which did not disclose the existence of the Audit Firm’s December 1, 2016
letter or the letter’s contents, and which instead just contained language that the
District’s financial statements are audited annually and generally available about six
months after the close of the fiscal year.  The POS also contained a copy of the Audit
Firm’s fiscal year 2015 audit report, which issued the District’s financial statements
an unmodified or clean audit opinion.  The POS was materially misleading because it

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suggested that the fiscal year 2016 audit would be forthcoming in a timely fashion
without disclosing that the Audit Firm requested a closed Board meeting to discuss
concerns, including concerns about alleged improprieties at the District, that could
delay the audit’s completion.  Rojas approved and authorized the dissemination of the
POS to investors.
16. On December 9, 2016, the Audit Firm sent a second letter to Montebello,
which was circulated to Rojas, Montebello’s Superintendent, and each of
Montebello’s five Board members.  The Audit Firm’s second letter noted that
additional matters had arisen that could potentially prevent the completion of the
fiscal year 2016 audit.  Among other things, the Audit Firm explained that: (1) certain
audit procedures had been delayed due to the actions of Montebello’s management;
(2) expanded procedures were necessary in order for the Audit Firm to complete the
audit and render an audit opinion; and (3) Montebello needed to request an extension
of the December 15 deadline for the filing of its audited financial statements with the
Los Angeles County Office of Education (“LACOE”) and California State
Controller’s Office.  The Audit Firm also reiterated its request for a closed session
meeting with Montebello’s Board to discuss its concerns and to obtain authorization
to perform the required additional audit procedures.
17. On or about the same time that the Audit Firm sent its December 9, 2016
letter, the Audit Firm’s lead partner working on Montebello’s audit spoke by phone
with Montebello’s General Counsel.  During that call, the lead partner noted that the
Audit Firm had concerns related to allegations of fraud and misconduct at
Montebello, including specifically with respect to Rojas, and that the Audit Firm
could not complete its audit without performing expanded procedures related to those
concerns.
18. On December 12, 2016, the lead partner sent an email to Montebello’s
General Counsel further detailing the Audit Firm’s concerns as well as laying out
specific steps that were required to be completed under governing auditing standards

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before the Audit Firm could finish its audit work.  Among other things, the December
12, 2016 email noted that the Audit Firm had concerns about: (i) “allegations relating
to the qualifications and integrity of” Rojas, including allegations of “dishonesty,
improper procurements, conflict of interest, payroll mismanagement and
misrepresented prior experience;”   (ii) “[t]he absence of qualified management
personnel to respond to audit inquiries, provide representations on behalf of the
District, and review and take responsibility for the District’s financial statements and
the assertions contained therein;”  (iii) “[c]oncerns as to motivation and delays caused
by Ruben Rojas’s decision to alter [] letters to District attorneys requesting
information as to matters of potential financial statement significance;”   and (iv)
“[i]ncomplete audit information and delays caused by the failure of Ruben Rojas to
respond to a request for a discussion” regarding the “risk of financial fraud at the
District, efforts to mitigate against fraud, and his knowledge of any actual or alleged
instances of fraud.”
19. The December 12, 2016 email further stated that, as a result of the above
issues, the Audit Firm could not complete its pending audit of Montebello’s fiscal
year 2016 financial statements because, among other things: (i) it could not rely on
the representations provided by Rojas; (ii) could not “obtain an understanding of the
District’s assessment of risks of fraud, fraud mitigation procedures, allegations of
fraud, and incidents of fraud;”   and (iii) could not “obtain information directly from
attorneys providing legal services to the District” necessary for completion of the
audit.
20. Montebello’s General Counsel forwarded the Audit Firm’s December
12, 2016 email to the District’s Superintendent.  On December 13, 2016,
Montebello’s General Counsel and Superintendent had a call with the Audit Firm’s
lead partner to further discuss the Audit Firm’s concerns.
21. On December 13, 2016, Rojas signed, on Montebello’s behalf, the
Contract of Purchase with the underwriters for the bond offering.  In addition to

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setting forth the interest rates, yields, and repayment schedule for the bonds, the
Contract of Purchase required Montebello to disclose, and to certify in writing the
disclosure of, any information of which Montebello was aware that would render the
information in the FOS false or materially misleading as of the planned December 28,
2016 final closing date.  The Contract of Purchase also authorized, up to the final
closing date, the underwriters to cancel the bond offering if Montebello disclosed, or
the underwriters learned of, information that would render the information in the FOS
false or materially misleading.
22. On or about December 14, 2016, the Audit Firm lead partner and Rojas
had a call where the lead partner reiterated the various issues the Audit Firm had
identified for Montebello, including fraud and internal controls concerns related
specifically to Rojas.  Among other things, the lead partner noted that Montebello
was now considered at a higher risk level from an audit standpoint, which
necessitated the performance of expanded audit procedures before the pending audit
could be completed.
Montebello Terminates the Audit Firm, While Montebello and Rojas Fail to
Disclose the Audit Firm’s Communications and Termination
23. On December 15, 2016, Montebello’s Board, Superintendent, General
Counsel, and Rojas discussed the Audit Firm’s concerns and request to perform
expanded audit procedures during a closed Board meeting session.  Because the
discussion occurred in closed session, no members of the public were permitted to
attend and the contents of the discussion were not disclosed.  Furthermore, the
discussion regarding the Audit Firm during the closed session was not on the Board’s
written agenda for the meeting and the results of the discussion were not recorded in
the Board minutes.  During the closed meeting, Montebello’s Board and management
refused to authorize the fees needed for the requested expanded procedures, which
precluded the Audit Firm from being able to investigate its concerns, complete its
pending audit, or issue an audit opinion.  During that same December 15, 2016 non-

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public Board meeting, or in the days immediately after it, Montebello also decided to
fire the Audit Firm.  On December 22, 2016, Rojas informed the Audit Firm by
phone that it had been terminated by Montebello and instructed the firm to stop
performing all audit work.
24. On December 19, 2016, Montebello issued the Supplemented POS, and
on December 21, 2016, it disseminated the FOS.  The Supplemented POS and FOS
deceptively stated that the Audit Firm “serves as independent auditor to the District”
and included a clean audit opinion from the Audit Firm from the prior fiscal year,
while failing to disclose the Audit Firm’s concerns; Montebello’s refusal to provide
the Audit Firm with additional funds to perform additional investigation and
analyses; and the Audit Firm’s termination.  In light of those omissions, the statement
that the Audit Firm serves as independent auditor to the District and the inclusion of
the clean audit report were materially misleading because they gave the false
impression that the audit and a   clean audit opinion for fiscal year 2016 would be
forthcoming in a timely fashion.
25. These misleading statements and omissions were material to investors.
The undisclosed information would have been significant to the underwriters’ and
their counsel’s willingness to move forward with Montebello’s bond offering at that
time, and would have been material to an investor’s willingness to purchase
Montebello’s bonds at the then-prevailing price and yield.
  Montebello’s Contract of
Purchase with the underwriters required Montebello’s disclosure of this information
to the underwriters by no later than the December 28, 2016 final closing date, and
authorized the underwriters to cancel the offering before the final closing.
26. Rather than inform the underwriters as well as bond and disclosure
counsel about the omitted information regarding the Audit Firm’s concerns and
termination, Montebello provided those firms with multiple false certifications, dated
December 28, 2016.  Those certifications falsely represented that the POS as
supplemented and FOS did not contain any material misleading statements or

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omissions.
27. Rojas received multiple drafts of the Offering Documents, helped
prepare the POS and Supplemented POS, and approved each of the Offering
Documents’ dissemination before they were sent to investors.  Based on his receipt
and review of multiple drafts of the Offering Documents, Rojas knew, was reckless in
not knowing, or should have known that the Offering Documents contained
misleading statements and omissions related to the Audit Firm and the District’s
fiscal year 2016 financial statement audit.
28. Rojas acted with knowledge, recklessness, or a   failure to exercise
reasonable care when he authorized the dissemination of the Offering Documents to
investors even though they contained materially misleading statements and omissions
regarding the Audit Firm, the status of the fiscal year 2016 audit, and the District’s
audited financial statements.  Rojas also acted with knowledge, recklessness, or a
failure to exercise reasonable care, when he concealed from bond and disclosure
counsel and the underwriters the Audit Firm’s concerns, request to perform expanded
audit procedures, and termination.
29. To the extent that Rojas – the person at Montebello in charge of
managing the bond offering and whose job responsibilities included running all
aspects of the District’s bond program – did not review the various draft Offering
Documents he received in order to understand their contents, including their
references to Montebello’s auditor and audited financial statements, he acted at the
very least with recklessness and failed to exercise reasonable care.
Rojas Engages in Additional Conduct that Concealed the Audit Firm’s Concerns
and Termination from Gatekeepers and Investors
30. Rojas engaged in additional conduct that concealed the Audit Firm’s
various concerns.  On December 14, 2016, Rojas sent a letter to LACOE, which was
also provided to the California State Controller’s Office, requesting an extension to
the December 15, 2016 deadline for the filing of the District’s fiscal year 2016 audit

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report.  Among other things, the letter stated that the Audit Firm had “informed the
District that an extension should be filed as the Auditors ‘require additional
supporting documentation in connection with expanded test work in certain areas.’”
The letter was misleading, however, because it did not disclose the concerns raised by
the Audit Firm or that the Audit Firm’s “expanded test work” related to concerns
about allegations of fraud and internal controls issues identified by the Audit Firm.
Rojas wrote this misleading letter.
31. In addition, in December 2016, while Rojas was working with bond and
disclosure counsel on the Supplemented POS, counsel specifically inquired about the
status of the fiscal year 2016 audit.  Rojas responded on December 19, 2016 by
stating only that Montebello had received an extension of the filing deadline for the
audit report.  Rojas did not disclose to bond and disclosure counsel the concerns
raised by the Audit Firm, the need to perform additional audit procedures, or that
Montebello decided to fire the Audit Firm.  If Rojas had disclosed the Audit Firm’s
concerns and termination to bond and disclosure counsel, counsel would have
included disclosures about those items as well as the related delay in the completion
of Montebello’s fiscal year 2016 financial statement audit in the offering documents
for Montebello’s December 2016 bonds.
32. A new audit firm, the Replacement Firm, was hired to re-perform
Montebello’s fiscal year 2016 financial statement audit in January 2017, after the
December 2016 bond offering successfully closed on December 28, 2016.  In January
2017, the engagement partner for the Replacement Firm asked Rojas on a phone call
why the Audit Firm had been terminated by Montebello.  In response, Rojas
concealed the fact that the Audit Firm had repeatedly raised concerns about
allegations of fraud and internal controls issues at Montebello, including concerns
related specifically to Rojas, and had also requested authorization to perform
expanded audit procedures required by governing auditing standards in order for the
completion of its pending audit.  Instead, Rojas responded by noting only that the

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Audit Firm had tried to bill the District for additional fees and that Montebello’s
Board was not happy about that and thus decided to terminate the firm.  Rojas’s
deceptive and partial disclosure of information in response to the Replacement Firm’s
inquiry again prevented public disclosure of the Audit Firm’s concerns, including
concerns about allegations of fraud and improprieties specifically involving Rojas.
33. Montebello ultimately paid the Audit Firm $98,700 for the work that it
performed in connection with the District’s fiscal year 2016 financial statement audit
before being fired.  Montebello subsequently paid the Replacement Firm another
$76,000 to perform a completely new audit of the District’s fiscal year 2016 financial
statements.  Thus, Montebello incurred significant costs as a result of its decision to
fire the Audit Firm after the firm raised its concerns.
34. When the Replacement Firm finally completed its fiscal year 2016 audit
of Montebello in May 2017, it issued the District a qualified audit opinion, noting:
“We were unable to obtain sufficient appropriate audit evidence to sufficiently reduce
the risk of material misstatement of the financial statements due to potential fraud.”
The Replacement Firm also identified 13 significant deficiencies in Montebello’s
internal controls.
FIRST CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5(a) Thereunder
35. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.
36. By reason of the foregoing, Rojas directly or indirectly, by use of the
means or instrumentalities of interstate commerce or of the mails, or of the facilities
of a national securities exchange, in connection with the purchase or sale of
securities, knowingly or recklessly, has employed devices, schemes, and artifices to
defraud.
37. By reason of the foregoing, Rojas directly or indirectly has violated, and
unless enjoined will again violate, Section 10(b) of the Exchange Act [15 U.S.C. §

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78j(b)] and Rule 10b-5(a) thereunder [17 C.F.R. § 240.10b-5(a)].
SECOND CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) Thereunder
38. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.
39. By reason of the foregoing, Rojas directly or indirectly, by use of the
means or instrumentalities of interstate commerce or of the mails, or of the facilities
of a national securities exchange, in connection with the purchase or sale of
securities, knowingly or recklessly, has made untrue statements of material fact, or
omitted to state material facts necessary in order to make statements made, in the
light of the circumstances under which they were made, not misleading.
40. By reason of the foregoing, Rojas directly or indirectly, has violated, and
unless enjoined will again violate, Section 10(b) of the Exchange Act [15 U.S.C. §
78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. § 240.10b-5(b)].
THIRD CLAIM FOR RELIEF
Violations of Section 10(b) of the Exchange Act and Rule 10b-5(c) Thereunder
41. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.
42. By reason of the foregoing, Rojas directly or indirectly, by use of the
means or instrumentalities of interstate commerce or of the mails, or of the facilities
of a national securities exchange, in connection with the purchase or sale of
securities, knowingly or recklessly, has engaged in acts, practices and courses of
business which operated or would have operated as a fraud or deceit upon purchasers
of securities and upon other persons.
43. By reason of the foregoing, Rojas directly or indirectly, has violated, and
unless enjoined will again violate, Section 10(b) of the Exchange Act [15 U.S.C. §
78j(b)] and Rule 10b-5(c) thereunder [17 C.F.R. § 240.10b-5(c)].

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FOURTH CLAIM FOR RELIEF
Violations of Section 17(a)(1) of the Securities Act
44. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.
45. By reason of the foregoing, Rojas directly or indirectly, in the offer or
sale of securities, by use of the means or instruments of transportation or
communication in interstate commerce or by use of the mails, knowingly or
recklessly, has employed devices, schemes, and artifices to defraud.
46. By reason of the foregoing, Rojas directly or indirectly, has violated, and
unless enjoined will continue to violate, Section 17(a)(1) of the Securities Act [15
U.S.C. § 77q(a)(1)].
FIFTH CLAIM FOR RELIEF
Violations of Section 17(a)(3) of the Securities Act
47. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.
48. By reason of the foregoing, Rojas directly or indirectly, in the offer or
sale of securities, by use of the means or instruments of transportation or
communication in interstate commerce or by use of the mails, has engaged in
transactions, practices, or courses of business which operated or would operate as a
fraud or deceit upon the purchasers.
49. By reason of the foregoing, Rojas directly or indirectly, has violated, and
unless enjoined will continue to violate, Section 17(a)(3) of the Securities Act [15
U.S.C. § 77q(a)(3)].
SIXTH CLAIM FOR RELIEF
Control Person Liability for Montebello’s Violations of Section 10(b) of the
Exchange Act and Rule 10b-5 Thereunder
50. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.

COMPLAINT
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51. By reason of the foregoing, Montebello violated Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-
5].
52. At all times relevant hereto, Rojas directly or indirectly controlled
Montebello for purposes of Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)].
53. By engaging in the conduct alleged above, Rojas is  liable as a control
person for Montebello’s violations of Section 10(b) of the Exchange Act [15 U.S.C. §
78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
SEVENTH CLAIM FOR RELIEF
Aiding and Abetting Liability for Montebello’s Violations of Section 10(b) of the
Exchange Act and Rule 10b-5 Thereunder, and
Section 17(a) of the Securities Act
54. The Commission re-alleges and incorporates by reference Paragraphs 1
through 34 above, as though fully set forth herein.
55. By reason of the foregoing, Montebello violated Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. §§ 240.10b-
5], and Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
56. Rojas knew, or recklessly disregarded, that Montebello’s conduct was
improper and rendered Montebello substantial assistance in this conduct.
57. By reason of the foregoing, Rojas aided and abetted Montebello’s
violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5
thereunder [17 C.F.R. § 240.10b-5] as well as Section 17(a) of the Securities Act [15
U.S.C. §§ 77q(a)].
PRAYER FOR RELIEF
 WHEREFORE, the Commission respectfully requests that this Court grant the
following relief:
I.
 Enter an Order permanently restraining and enjoining Rojas from committing

COMPLAINT
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and/or aiding and abetting the violations of the federal securities laws alleged against
him in this Complaint.
II.
Enter an Order permanently restraining and enjoining Rojas from participating
in an offering of municipal securities, including engaging in activities with a broker,
dealer, or issuer for the purposes of issuing, trading, or inducing or attempting to
induce the purchase or sale of any municipal security.
III.
Enter an Order imposing civil money penalties upon Rojas pursuant to Section
20(d)(1) of the Securities Act [15 U.S.C. § 77t(d)(1)] and Section 21(d)(3) of the
Exchange Act [15 U.S.C. § 78u(d)(3)].
IV.
Grant such other and further relief, including equitable, as the Court may deem
just and proper.
Dated:  September 19, 2019 /s/ Jason H. Lee
   Jason H. Lee
   Attorney for Plaintiff
        SECURITIES AND EXCHANGE COMMISSION

COMPLAINT   

 

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JOHN S. YUN (Cal. Bar No. 112260) 
  E-mail:  [email protected] 
JASON H. LEE (Cal. Bar No. 253140) 
  E-mail:  [email protected] 
 
Attorneys for Plaintiff 
Securities and Exchange Commission 
Erin E. Schneider, Regional Director 
Monique C. Winkler, Associate Regional Director 
44 Montgomery Street, Suite 2800 
San Francisco, California 94104 
Telephone:  (415) 705-2500 
Facsimile:  (415) 705-2501 
 

UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 
 

vs. 

RUBEN JAMES ROJAS,           

Defendant. 
 

 Case No.:   
 
COMPLAINT 
 

 

  

 

 

 

 

 

Case 5:19-cv-01799   Document 1   Filed 09/19/19   Page 1 of 17   Page ID #:1



 

COMPLAINT 1  
 

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Plaintiff Securities and Exchange Commission (“Commission”) alleges: 

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 

and Sections 20(b), 20(d), and 22(a) of the Securities Act of 1933 (“Securities Act”) 

[15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)] and Sections 21(d), 21(e), and 27 of the 

Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d), 78u(e), and 

78aa]. 

2. Venue is proper in this district pursuant to 28 U.S.C. § 1391(b)(2), 

Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], and Section 27 of the 

Exchange Act [15 U.S.C. § 78aa].  Certain of the events constituting or giving rise to 

the alleged violations of the federal securities laws occurred in the Central District of 

California.  In addition, the defendant resides in this district. 

SUMMARY OF THE ACTION 

3. Under the direction of defendant Ruben James Rojas (“Rojas”), 

the Montebello Unified School District’s (“Montebello” or the “District”) Chief 

Business Officer, Montebello sold $100 million in municipal bonds to public 

investors in late December 2016 in violation of the federal securities 

laws.  Specifically, Rojas and Montebello concealed from investors in the offering 

that Montebello’s independent auditor had raised concerns about potential fraud and 

internal controls problems at the District.   

4. Beginning in mid-November 2016, over a month before the final bond 

sale, a senior Montebello accounting officer told Montebello’s independent auditor 

(the “Audit Firm”) about allegations of fraud and accounting improprieties at the 

District. The Audit Firm requested information regarding these allegations, but 

Montebello and Rojas failed to provide timely responses, thereby impeding the 

audit’s timely completion. The Audit Firm repeatedly warned Rojas, 

other Montebello officials and Montebello’s Board of Education (“Board”) that the 

Audit Firm could not complete its pending audit for fiscal year 2016 without 

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COMPLAINT 2  
 

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conducting further analyses of the fraud allegations and the District’s accounting 

controls.   

5. Rather than authorizing the Audit Firm to conduct the necessary 

analyses and audit procedures, Montebello and Rojas terminated the Audit Firm on or 

soon after a Montebello Board meeting on December 15, 2016.  This 

termination foreclosed the Audit Firm’s performance of additional audit procedures 

and prevented the Audit Firm from completing its fiscal year 2016 audit of 

Montebello’s financial statements.   

6. Montebello and Rojas concealed the Audit Firm’s termination 

and concerns from investors in the December 2016 bond offering.  Instead of 

disclosing the Audit firm’s termination and concerns, Montebello’s bond offering 

documents deceptively stated only that the Audit Firm “serves as independent auditor 

to the District” and attached the fiscal year 2015 audited financial statements from the 

Audit Firm, with a clean audit opinion by the Audit Firm for the previous fiscal 

year.  These statements and omissions gave investors the false impression that the 

fiscal year 2016 audit, and a clean opinion for that audit, would be forthcoming.   

7. Rojas rendered the bond offering documents materially misleading and 

carried out a fraudulent scheme to conceal significant issues raised by the Audit 

Firm in violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated 

thereunder, as well as Sections 17(a)(1) and 17(a)(3) of the Securities 

Act.  Rojas also aided and abetted Montebello’s violations of Section 10(b) of the 

Exchange Act, Rule 10b-5 thereunder, and Section 17(a) of the Securities 

Act.  Additionally, Rojas is liable for each of Montebello’s Exchange Act violations 

as a control person of the District. 

DEFENDANT 

8. Ruben James Rojas, age 56, is a resident of Corona, California.  From 

July 2015 to March 2017, he served as the Chief Business Officer of Montebello.  

Rojas oversaw and managed Montebello’s $100 million bond offering, including the 

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COMPLAINT 3  
 

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preparation of the offering documents for the bonds, which included a Preliminary 

Official Statement (“POS”), a Supplemented Preliminary Official Statement 

(“Supplemented POS”), and a Final Official Statement (“FOS”) (collectively, 

“Offering Documents”).  Rojas was the primary contact for the bond and disclosure 

counsel and municipal advisor retained by Montebello to assist with the bond 

offering.  He was also the primary person through which bond and disclosure 

counsel, the municipal advisor, the underwriters, and underwriters’ counsel received 

information for inclusion in the Offering Documents for the bonds.  Rojas received, 

reviewed and provided edits for multiple drafts of the Offering Documents, and was 

the only Montebello staff member whose approval was required before any of the 

three Offering Documents could be disseminated to investors.  Rojas provided such 

approval for the dissemination of each document.  Montebello placed Rojas on 

temporary paid administrative leave for one month beginning in late summer of 2016, 

and ultimately terminated his contract in March 2017.   

RELEVANT ENTITIES 

9. Montebello Unified School District is a California public school 

district that was established in 1936.  Its territory spans multiple cities located in 

eastern Los Angeles County, California.  It is governed by a five-member elected 

Board of Education.  Using email, Montebello disseminated the POS for the $100 

million bond offering to investors on December 7, 2016, disseminated the 

Supplemented POS to investors on December 19, 2016, and disseminated the FOS to 

investors on December 21, 2016.  Montebello posted the FOS on the Municipal 

Securities Rulemaking Board’s Electronic Municipal Market Access website, an 

online repository that provides public access to municipal securities disclosures and 

related information.  After the bond offering closed on December 28, 2016, 

Montebello received the cash proceeds generated by the offering, less fees paid to the 

professional firms which provided services in connection with the deal. 

10. The Audit Firm is an independent auditing firm with its principal place 

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of business in Los Angeles, California.  It has been registered with the Public 

Company Accounting Oversight Board since 2003.  The Audit Firm served as 

Montebello’s independent auditor and audited the District’s financial statements for 

fiscal years 2014 and 2015.  The Audit Firm also served as Montebello’s independent 

auditor for fiscal year 2016, ending on June 30, 2016, but was fired before it could 

complete its audit for that year.    

FACTUAL ALLEGATIONS 

Montebello Retains the Audit Firm for its Fiscal Year 2016 Audit 

11. On March 3, 2016, Montebello’s Board approved the Audit Firm’s 

retention to audit the District’s fiscal year 2016 financial statements.  Rojas signed 

the Engagement Letter on behalf of Montebello on March 12, 2016.  Under the 

requirements of Section 41020 of the California Education Code, the completed fiscal 

year 2016 audited financial statements were due by December 15, 2016.   

12. The Engagement Letter specified an audit fee of $91,500, subject to the 

need by the Audit Firm to spend additional time due to Montebello’s failure to 

facilitate the audit by making information available or due to “unexpected 

circumstances.”  The Engagement Letter made Montebello responsible for providing 

the Audit Firm with the access, information and representation letters necessary to 

complete the audit in a timely manner. The Engagement Letter also provided that the 

audit would be conducted in accordance with Generally Accepted Auditing Standards 

(“GAAS”), Government Auditing Standards (“GAS”), the Standards and Procedures 

for Audit of California K-12 Local Educational Agencies 2015-2016, as well as 

certain specified United States and California requirements.  The Engagement Letter 

further stated that the Audit Firm would review Montebello’s accounting controls and 

would disclose weaknesses in Montebello’s accounting controls in its audit report.  

The Engagement Letter therefore described the work that the Audit Firm had to 

perform to provide a clean opinion for the District’s fiscal year 2016 audited financial 

statements.  

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COMPLAINT 5  
 

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The Audit Firm Repeatedly Raises Concerns About Fraud And Internal 

Controls Issues 

13. Shortly before or during a visit to Montebello’s offices in mid-

November 2016, the lead partner and a manager for the Audit Firm learned that Rojas 

had been placed on administrative leave during the month of September 2016 due to 

allegations of improper conduct.  At the office visit, a senior Montebello manager 

also informed the Audit Firm that there were certain accounting areas, such as 

contract authorization, procurement, and information technology, as well as 

management integrity, which the Audit Firm should look into.  In light of this 

conversation, the Audit Firm began seeking additional documents and information 

regarding the allegations of misconduct and the District’s accounting controls.  

14. On December 1, 2016, the Audit Firm sent a letter to Montebello noting 

that it had been made aware of allegations of improprieties at the District as well as 

questions concerning Rojas’s qualifications and integrity, which could impact the 

firm’s ability to complete its pending audit of Montebello’s fiscal year 2016 financial 

statements.  Additionally, the Audit Firm made the highly unusual request for a 

closed session meeting with Montebello’s Board to discuss the Firm’s concerns.  

Montebello’s Superintendent of Schools (“Superintendent”) and Board president 

received a copy of the letter on December 2, 2016.  By the morning of December 7, 

2016, Rojas had also received a copy of the letter and discussed it with the District’s 

Superintendent.   

15. In the late evening of December 7, 2016, Montebello issued the POS to 

investors, which did not disclose the existence of the Audit Firm’s December 1, 2016 

letter or the letter’s contents, and which instead just contained language that the 

District’s financial statements are audited annually and generally available about six 

months after the close of the fiscal year.  The POS also contained a copy of the Audit 

Firm’s fiscal year 2015 audit report, which issued the District’s financial statements 

an unmodified or clean audit opinion.  The POS was materially misleading because it 

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COMPLAINT 6  
 

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suggested that the fiscal year 2016 audit would be forthcoming in a timely fashion 

without disclosing that the Audit Firm requested a closed Board meeting to discuss 

concerns, including concerns about alleged improprieties at the District, that could 

delay the audit’s completion.  Rojas approved and authorized the dissemination of the 

POS to investors.   

16. On December 9, 2016, the Audit Firm sent a second letter to Montebello, 

which was circulated to Rojas, Montebello’s Superintendent, and each of 

Montebello’s five Board members.  The Audit Firm’s second letter noted that 

additional matters had arisen that could potentially prevent the completion of the 

fiscal year 2016 audit.  Among other things, the Audit Firm explained that: (1) certain 

audit procedures had been delayed due to the actions of Montebello’s management; 

(2) expanded procedures were necessary in order for the Audit Firm to complete the 

audit and render an audit opinion; and (3) Montebello needed to request an extension 

of the December 15 deadline for the filing of its audited financial statements with the 

Los Angeles County Office of Education (“LACOE”) and California State 

Controller’s Office.  The Audit Firm also reiterated its request for a closed session 

meeting with Montebello’s Board to discuss its concerns and to obtain authorization 

to perform the required additional audit procedures.   

17. On or about the same time that the Audit Firm sent its December 9, 2016 

letter, the Audit Firm’s lead partner working on Montebello’s audit spoke by phone 

with Montebello’s General Counsel.  During that call, the lead partner noted that the 

Audit Firm had concerns related to allegations of fraud and misconduct at 

Montebello, including specifically with respect to Rojas, and that the Audit Firm 

could not complete its audit without performing expanded procedures related to those 

concerns.    

18. On December 12, 2016, the lead partner sent an email to Montebello’s 

General Counsel further detailing the Audit Firm’s concerns as well as laying out 

specific steps that were required to be completed under governing auditing standards 

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before the Audit Firm could finish its audit work.  Among other things, the December 

12, 2016 email noted that the Audit Firm had concerns about: (i) “allegations relating 

to the qualifications and integrity of” Rojas, including allegations of “dishonesty, 

improper procurements, conflict of interest, payroll mismanagement and 

misrepresented prior experience;” (ii) “[t]he absence of qualified management 

personnel to respond to audit inquiries, provide representations on behalf of the 

District, and review and take responsibility for the District’s financial statements and 

the assertions contained therein;”  (iii) “[c]oncerns as to motivation and delays caused 

by Ruben Rojas’s decision to alter [] letters to District attorneys requesting 

information as to matters of potential financial statement significance;” and (iv) 

“[i]ncomplete audit information and delays caused by the failure of Ruben Rojas to 

respond to a request for a discussion” regarding the “risk of financial fraud at the 

District, efforts to mitigate against fraud, and his knowledge of any actual or alleged 

instances of fraud.” 

19. The December 12, 2016 email further stated that, as a result of the above 

issues, the Audit Firm could not complete its pending audit of Montebello’s fiscal 

year 2016 financial statements because, among other things: (i) it could not rely on 

the representations provided by Rojas; (ii) could not “obtain an understanding of the 

District’s assessment of risks of fraud, fraud mitigation procedures, allegations of 

fraud, and incidents of fraud;” and (iii) could not “obtain information directly from 

attorneys providing legal services to the District” necessary for completion of the 

audit.        

20. Montebello’s General Counsel forwarded the Audit Firm’s December 

12, 2016 email to the District’s Superintendent.  On December 13, 2016, 

Montebello’s General Counsel and Superintendent had a call with the Audit Firm’s 

lead partner to further discuss the Audit Firm’s concerns.   

21. On December 13, 2016, Rojas signed, on Montebello’s behalf, the 

Contract of Purchase with the underwriters for the bond offering.  In addition to 

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COMPLAINT 8  
 

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setting forth the interest rates, yields, and repayment schedule for the bonds, the 

Contract of Purchase required Montebello to disclose, and to certify in writing the 

disclosure of, any information of which Montebello was aware that would render the 

information in the FOS false or materially misleading as of the planned December 28, 

2016 final closing date.  The Contract of Purchase also authorized, up to the final 

closing date, the underwriters to cancel the bond offering if Montebello disclosed, or 

the underwriters learned of, information that would render the information in the FOS 

false or materially misleading. 

22. On or about December 14, 2016, the Audit Firm lead partner and Rojas 

had a call where the lead partner reiterated the various issues the Audit Firm had 

identified for Montebello, including fraud and internal controls concerns related 

specifically to Rojas.  Among other things, the lead partner noted that Montebello 

was now considered at a higher risk level from an audit standpoint, which 

necessitated the performance of expanded audit procedures before the pending audit 

could be completed.         

Montebello Terminates the Audit Firm, While Montebello and Rojas Fail to 

Disclose the Audit Firm’s Communications and Termination 

23. On December 15, 2016, Montebello’s Board, Superintendent, General 

Counsel, and Rojas discussed the Audit Firm’s concerns and request to perform 

expanded audit procedures during a closed Board meeting session.  Because the 

discussion occurred in closed session, no members of the public were permitted to 

attend and the contents of the discussion were not disclosed.  Furthermore, the 

discussion regarding the Audit Firm during the closed session was not on the Board’s 

written agenda for the meeting and the results of the discussion were not recorded in 

the Board minutes.  During the closed meeting, Montebello’s Board and management 

refused to authorize the fees needed for the requested expanded procedures, which 

precluded the Audit Firm from being able to investigate its concerns, complete its 

pending audit, or issue an audit opinion.  During that same December 15, 2016 non-

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public Board meeting, or in the days immediately after it, Montebello also decided to 

fire the Audit Firm.  On December 22, 2016, Rojas informed the Audit Firm by 

phone that it had been terminated by Montebello and instructed the firm to stop 

performing all audit work. 

24. On December 19, 2016, Montebello issued the Supplemented POS, and 

on December 21, 2016, it disseminated the FOS.  The Supplemented POS and FOS 

deceptively stated that the Audit Firm “serves as independent auditor to the District” 

and included a clean audit opinion from the Audit Firm from the prior fiscal year, 

while failing to disclose the Audit Firm’s concerns; Montebello’s refusal to provide 

the Audit Firm with additional funds to perform additional investigation and 

analyses; and the Audit Firm’s termination.  In light of those omissions, the statement 

that the Audit Firm serves as independent auditor to the District and the inclusion of 

the clean audit report were materially misleading because they gave the false 

impression that the audit and a clean audit opinion for fiscal year 2016 would be 

forthcoming in a timely fashion.   

25. These misleading statements and omissions were material to investors.  

The undisclosed information would have been significant to the underwriters’ and 

their counsel’s willingness to move forward with Montebello’s bond offering at that 

time, and would have been material to an investor’s willingness to purchase 

Montebello’s bonds at the then-prevailing price and yield.  Montebello’s Contract of 

Purchase with the underwriters required Montebello’s disclosure of this information 

to the underwriters by no later than the December 28, 2016 final closing date, and 

authorized the underwriters to cancel the offering before the final closing.  

26. Rather than inform the underwriters as well as bond and disclosure 

counsel about the omitted information regarding the Audit Firm’s concerns and 

termination, Montebello provided those firms with multiple false certifications, dated 

December 28, 2016.  Those certifications falsely represented that the POS as 

supplemented and FOS did not contain any material misleading statements or 

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omissions. 

27. Rojas received multiple drafts of the Offering Documents, helped 

prepare the POS and Supplemented POS, and approved each of the Offering 

Documents’ dissemination before they were sent to investors.  Based on his receipt 

and review of multiple drafts of the Offering Documents, Rojas knew, was reckless in 

not knowing, or should have known that the Offering Documents contained 

misleading statements and omissions related to the Audit Firm and the District’s 

fiscal year 2016 financial statement audit.   

28. Rojas acted with knowledge, recklessness, or a failure to exercise 

reasonable care when he authorized the dissemination of the Offering Documents to 

investors even though they contained materially misleading statements and omissions 

regarding the Audit Firm, the status of the fiscal year 2016 audit, and the District’s 

audited financial statements.  Rojas also acted with knowledge, recklessness, or a 

failure to exercise reasonable care, when he concealed from bond and disclosure 

counsel and the underwriters the Audit Firm’s concerns, request to perform expanded 

audit procedures, and termination.    

29. To the extent that Rojas – the person at Montebello in charge of 

managing the bond offering and whose job responsibilities included running all 

aspects of the District’s bond program – did not review the various draft Offering 

Documents he received in order to understand their contents, including their 

references to Montebello’s auditor and audited financial statements, he acted at the 

very least with recklessness and failed to exercise reasonable care.   

Rojas Engages in Additional Conduct that Concealed the Audit Firm’s Concerns 

and Termination from Gatekeepers and Investors 

30. Rojas engaged in additional conduct that concealed the Audit Firm’s 

various concerns.  On December 14, 2016, Rojas sent a letter to LACOE, which was 

also provided to the California State Controller’s Office, requesting an extension to 

the December 15, 2016 deadline for the filing of the District’s fiscal year 2016 audit 

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report.  Among other things, the letter stated that the Audit Firm had “informed the 

District that an extension should be filed as the Auditors ‘require additional 

supporting documentation in connection with expanded test work in certain areas.’”  

The letter was misleading, however, because it did not disclose the concerns raised by 

the Audit Firm or that the Audit Firm’s “expanded test work” related to concerns 

about allegations of fraud and internal controls issues identified by the Audit Firm.  

Rojas wrote this misleading letter.   

31. In addition, in December 2016, while Rojas was working with bond and 

disclosure counsel on the Supplemented POS, counsel specifically inquired about the 

status of the fiscal year 2016 audit.  Rojas responded on December 19, 2016 by 

stating only that Montebello had received an extension of the filing deadline for the 

audit report.  Rojas did not disclose to bond and disclosure counsel the concerns 

raised by the Audit Firm, the need to perform additional audit procedures, or that 

Montebello decided to fire the Audit Firm.  If Rojas had disclosed the Audit Firm’s 

concerns and termination to bond and disclosure counsel, counsel would have 

included disclosures about those items as well as the related delay in the completion 

of Montebello’s fiscal year 2016 financial statement audit in the offering documents 

for Montebello’s December 2016 bonds.   

32. A new audit firm, the Replacement Firm, was hired to re-perform 

Montebello’s fiscal year 2016 financial statement audit in January 2017, after the 

December 2016 bond offering successfully closed on December 28, 2016.  In January 

2017, the engagement partner for the Replacement Firm asked Rojas on a phone call 

why the Audit Firm had been terminated by Montebello.  In response, Rojas 

concealed the fact that the Audit Firm had repeatedly raised concerns about 

allegations of fraud and internal controls issues at Montebello, including concerns 

related specifically to Rojas, and had also requested authorization to perform 

expanded audit procedures required by governing auditing standards in order for the 

completion of its pending audit.  Instead, Rojas responded by noting only that the 

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COMPLAINT 12  
 

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Audit Firm had tried to bill the District for additional fees and that Montebello’s 

Board was not happy about that and thus decided to terminate the firm.  Rojas’s 

deceptive and partial disclosure of information in response to the Replacement Firm’s 

inquiry again prevented public disclosure of the Audit Firm’s concerns, including 

concerns about allegations of fraud and improprieties specifically involving Rojas.    

33. Montebello ultimately paid the Audit Firm $98,700 for the work that it 

performed in connection with the District’s fiscal year 2016 financial statement audit 

before being fired.  Montebello subsequently paid the Replacement Firm another 

$76,000 to perform a completely new audit of the District’s fiscal year 2016 financial 

statements.  Thus, Montebello incurred significant costs as a result of its decision to 

fire the Audit Firm after the firm raised its concerns.  

34. When the Replacement Firm finally completed its fiscal year 2016 audit 

of Montebello in May 2017, it issued the District a qualified audit opinion, noting: 

“We were unable to obtain sufficient appropriate audit evidence to sufficiently reduce 

the risk of material misstatement of the financial statements due to potential fraud.”  

The Replacement Firm also identified 13 significant deficiencies in Montebello’s 

internal controls.   

FIRST CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5(a) Thereunder 

35. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

36. By reason of the foregoing, Rojas directly or indirectly, by use of the 

means or instrumentalities of interstate commerce or of the mails, or of the facilities 

of a national securities exchange, in connection with the purchase or sale of 

securities, knowingly or recklessly, has employed devices, schemes, and artifices to 

defraud. 

37. By reason of the foregoing, Rojas directly or indirectly has violated, and 

unless enjoined will again violate, Section 10(b) of the Exchange Act [15 U.S.C. § 

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COMPLAINT 13  
 

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78j(b)] and Rule 10b-5(a) thereunder [17 C.F.R. § 240.10b-5(a)]. 

SECOND CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) Thereunder  

38. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

39. By reason of the foregoing, Rojas directly or indirectly, by use of the 

means or instrumentalities of interstate commerce or of the mails, or of the facilities 

of a national securities exchange, in connection with the purchase or sale of 

securities, knowingly or recklessly, has made untrue statements of material fact, or 

omitted to state material facts necessary in order to make statements made, in the 

light of the circumstances under which they were made, not misleading. 

40. By reason of the foregoing, Rojas directly or indirectly, has violated, and 

unless enjoined will again violate, Section 10(b) of the Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5(b) thereunder [17 C.F.R. § 240.10b-5(b)]. 

THIRD CLAIM FOR RELIEF 

Violations of Section 10(b) of the Exchange Act and Rule 10b-5(c) Thereunder  

41. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

42. By reason of the foregoing, Rojas directly or indirectly, by use of the 

means or instrumentalities of interstate commerce or of the mails, or of the facilities 

of a national securities exchange, in connection with the purchase or sale of 

securities, knowingly or recklessly, has engaged in acts, practices and courses of 

business which operated or would have operated as a fraud or deceit upon purchasers 

of securities and upon other persons. 

43. By reason of the foregoing, Rojas directly or indirectly, has violated, and 

unless enjoined will again violate, Section 10(b) of the Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5(c) thereunder [17 C.F.R. § 240.10b-5(c)]. 

 

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COMPLAINT 14  
 

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FOURTH CLAIM FOR RELIEF 

Violations of Section 17(a)(1) of the Securities Act 

44. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

45. By reason of the foregoing, Rojas directly or indirectly, in the offer or 

sale of securities, by use of the means or instruments of transportation or 

communication in interstate commerce or by use of the mails, knowingly or 

recklessly, has employed devices, schemes, and artifices to defraud. 

46. By reason of the foregoing, Rojas directly or indirectly, has violated, and 

unless enjoined will continue to violate, Section 17(a)(1) of the Securities Act [15 

U.S.C. § 77q(a)(1)]. 

FIFTH CLAIM FOR RELIEF 

Violations of Section 17(a)(3) of the Securities Act 

47. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

48. By reason of the foregoing, Rojas directly or indirectly, in the offer or 

sale of securities, by use of the means or instruments of transportation or 

communication in interstate commerce or by use of the mails, has engaged in 

transactions, practices, or courses of business which operated or would operate as a 

fraud or deceit upon the purchasers. 

49. By reason of the foregoing, Rojas directly or indirectly, has violated, and 

unless enjoined will continue to violate, Section 17(a)(3) of the Securities Act [15 

U.S.C. § 77q(a)(3)]. 

SIXTH CLAIM FOR RELIEF 

Control Person Liability for Montebello’s Violations of Section 10(b) of the 

Exchange Act and Rule 10b-5 Thereunder 

50. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

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COMPLAINT 15  
 

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51. By reason of the foregoing, Montebello violated Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-

5]. 

52. At all times relevant hereto, Rojas directly or indirectly controlled 

Montebello for purposes of Section 20(a) of the Exchange Act [15 U.S.C. § 78t(a)]. 

53. By engaging in the conduct alleged above, Rojas is liable as a control 

person for Montebello’s violations of Section 10(b) of the Exchange Act [15 U.S.C. § 

78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

SEVENTH CLAIM FOR RELIEF 

Aiding and Abetting Liability for Montebello’s Violations of Section 10(b) of the 

Exchange Act and Rule 10b-5 Thereunder, and  

Section 17(a) of the Securities Act 

54. The Commission re-alleges and incorporates by reference Paragraphs 1 

through 34 above, as though fully set forth herein. 

55. By reason of the foregoing, Montebello violated Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. §§ 240.10b-

5], and Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)]. 

56. Rojas knew, or recklessly disregarded, that Montebello’s conduct was 

improper and rendered Montebello substantial assistance in this conduct. 

57. By reason of the foregoing, Rojas aided and abetted Montebello’s 

violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 

thereunder [17 C.F.R. § 240.10b-5] as well as Section 17(a) of the Securities Act [15 

U.S.C. §§ 77q(a)]. 

PRAYER FOR RELIEF 

 WHEREFORE, the Commission respectfully requests that this Court grant the 

following relief: 

I. 

 Enter an Order permanently restraining and enjoining Rojas from committing 

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COMPLAINT 16  
 

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and/or aiding and abetting the violations of the federal securities laws alleged against 

him in this Complaint. 

II. 

Enter an Order permanently restraining and enjoining Rojas from participating 

in an offering of municipal securities, including engaging in activities with a broker, 

dealer, or issuer for the purposes of issuing, trading, or inducing or attempting to 

induce the purchase or sale of any municipal security.   

III. 

Enter an Order imposing civil money penalties upon Rojas pursuant to Section 

20(d)(1) of the Securities Act [15 U.S.C. § 77t(d)(1)] and Section 21(d)(3) of the 

Exchange Act [15 U.S.C. § 78u(d)(3)].  

IV. 

Grant such other and further relief, including equitable, as the Court may deem 

just and proper. 

Dated:  September 19, 2019 /s/ Jason H. Lee                           
   Jason H. Lee 
   Attorney for Plaintiff 

        SECURITIES AND EXCHANGE COMMISSION 

Case 5:19-cv-01799   Document 1   Filed 09/19/19   Page 17 of 17   Page ID #:17