The SEC charged California’s largest agricultural water district, the Westlands Water District, as well as its general manager and former assistant general manager, with misleading investors about Westlands’ financial condition in connection with a $77 million bond offering. The SEC’s order instituting settled administrative proceedings alleged that Westlands had agreed to maintain a 1.25 debt service coverage ratio. But when drought conditions reduced the water supply, preventing it from generating enough revenue to maintain the ratio, Westlands used extraordinary accounting transactions to reclassify funds from reserve accounts to record additional revenue. When the Westlands issued the $77 million bond offering in 2012 it represented to investors that it met or exceeded the 1.25 ratio for each of the prior five years. Absent the reclassifications and adjustments, Westlands’ ratio for 2010 would have been .11. Westlands and the charged managers agreed to pay $195,000 collectively to settle the SEC’s charges. SEC
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