The nation's largest agricultural water supplier, Westlands Water District, was fined by federal regulators for misleading bond investors regarding their financial status.
The Securities and Exchange Commission imposed the fine due to the district's bond issuance of $77 million. The Central California Water District, however, agreed to pay $125,000 in fines. This is considered the second time that SEC issued a penalty against a municipal-bond issuer. Birmingham, together with a former water district official, agreed to pay an additional $70,000 for additional penalties as per Orange County Register.
According to experts, Westlands executives were expecting the scarcity of water and drought to affect the district's revenue which will eventually make the bond issue less attractive to investors. Instead of increasing the water rates for its customers, the District used an improper accounting technique in order to make the agency look successful compared to its real status.
According to Andrew J. Ceresney of the SEC enforcement division, this action by Westlands left its investors in the dark regarding the district's true financial condition, as reported by The Wall Street Journal. But according to Westlands, it has only been following the advice given to them by their auditors.
As reported by ABC News, Westlands supplies irrigation water to 700 farms that grows everything from almonds to tomatoes in a 1,000 square mile of San Joaquin Valley, the leading producer of the nation's fruits, vegetables and nuts.
The District is also included as one of the main participants in the $15.7 billion plan that is being promoted by Gov. Jerry Brown to build two 35 mile tunnels to be able to carry more water to Central and Southern California. The District's general manager, Birmingham, declined to give his opinion on whether the actions of the SEC will affect its participation on the tunnel project.
