The SEC charges California Charter School Officials with Misleading Investors in Bond Offering
The Securities and Exchange Commission (SEC) charged William Batchelor and John Zukoski, former CEO and CFO of Tri-Valley Learning Corporation (Tri-Valley), the governing body of two California public charter schools, for misleading investors who purchased $25.54 million in bonds.
According to the SEC, the two public schools were operating at capacity with a waiting list when Tri-Valley issued a bond sale to finance a third campus. Batchelor and Zukoski assisted in drafting and signed a bond offering document to fund the purchase and renovation of the new school building. In addition, both signed a certification that stated no misrepresentations nor omissions were made in the offering.
According to the SEC Complaint:
Batchelor and Zukoski had knowledge of Tri-Valley’s financial hardships, which would impede Tri-Valley’s ability to make payments on the bonds, but did not disclose these on the bond offering.
The bond offering and accompanying documents included misrepresentations of Tri-Valley’s financial condition and misleading financial projections.
The memo accompanying the bond offering failed to disclose that Tri-Valley suffered thousands of dollars worth of debt, failed payments on a private loan, had reached the limit on a recently opened line of credit, and was only able to pay employees because of private funding from a non-profit organization run by Batchelor. Additionally, the memo inaccurately projected financials for 2015 through 2018.
Tri-Valley filed for bankruptcy in November 2016. The bonds subsequently defaulted in 2017.
The SEC's complaint, filed in U.S. District Court for the Northern District of California on April 27, 2020, charges Batchelor and Zukoski with violating the antifraud provision of the Securities Act of 1933. Without admitting or denying the charges, the California charter school officials agreed to be enjoined from violating the charged provisions and from participating in future municipal debt offerings. Batchelor and Zukoski’s settlement for a total of $35,000 penalties is pending court approval.
Investors who believe they may have lost money as a result of securities violations may contact the securities lawyers at Councill & Gunnemann, for a free, no-obligation evaluation of their recovery options.