UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 41976 / October 5, 1999
ADMINISTRATIVE PROCEEDINGS
FILE NO. 3-9858
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ORDER MAKING FINDINGS AND
In the Matter of IMPOSING REMEDIAL SANCTIONS
AGAINST MICHAEL A. CORNBLUM
PETER W. ZENT AND MICHAEL A.
CORNBLUM
Respondents.
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I.
On March 30, 1999, the Securities and Exchange Commission
("Commission") instituted cease-and-desist and public administrative
proceedings pursuant to Sections 15(b) and 21C of the Securities
Exchange Act of 1934 ("Exchange Act") against respondent Michael A.
Cornblum ("Cornblum" or "Respondent") to determine whether he
willfully violated Section 10(b) of the Exchange Act and Rule 10b-5
thereunder and, if so, what remedial sanctions, if any, were
appropriate.
In response to the institution of these proceedings, Cornblum has
submitted an Offer of Settlement ("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 in
which the Commission is a party, and without admitting or denying the
findings herein, except as to the jurisdiction of the Commission over
him and the subject matter of the proceeding, which are admitted,
Cornblum consents to the entry of the findings and remedial sanctions
set forth below.
II.
On the basis of this Order and the Offer, the Commission makes the
following findings
A. Nature of Proceeding
This matter involves material misrepresentations by Kidder, Peabody &
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION
PETER W. ZENT AND MICHAEL A. CORNBLUM
On March 30, 1999, the Securities and Exchange Commission instituted cease-and-desist and
This matter involves material misrepresentations by Kidder, Peabody & Co., Incorporated,
Kidder's purchase of the Agreement at less than fair market value had the effect of
In addition, to being a registered representative of MGIA, Cornblum was at all relevant times
MGIA was at all relevant times a San Francisco, California, based broker-dealer registered
Peter W. Zent was at all relevant times a registered representative of Kidder with the title
In April 1991, the City issued its tax-exempt $138,610,000 Utilities Tax and Special Revenue
The Series 1991 Bonds were advance refunding bonds, meaning that the City intended to use the
Because the previously-issued bonds were not then due and payable, the City set up an escrow
Pursuant to certain provisions of the Internal Revenue Code, a municipal issuer of tax-exempt
As a result, an opportunity existed for the City to earn additional investment income if the
Under the proposal, Kidder would make an initial cash payment to the City, and Kidder would
the City agreed to enter into an Escrow Reinvestment Agreement.
applicable IRC arbitrage provisions then in effect required that any payment to the City
The safe harbor rule required, among other things, that an issuer of tax-exempt bonds obtain
As part of this effort, Cornblum provided at least one bidder with false information that
G. Material Misrepresentations In The Representation Letter
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