SEC v. Vern A. Breland, No. 3:22-cv-01470, Western District of Louisiana (June 2, 2022) — Complaint

UNITED STATES DISTRICT COURT
 FOR THE WESTERN DISTRICT OF LOUISIANA

____________________________________________
)
SECURITIES AND EXCHANGE COMMISSION, )
   )
  }
  Plaintiff,       ) Civil Action No.:
)
 v.      )
)
VERN A. BRELAND,   )
   )
Defendant.   )
_____________________________________________

COMPLAINT

Plaintiff  United  States  Securities  and  Exchange  Commission  (the  “SEC”)
alleges:
SUMMARY OF ALLEGATIONS
 1. This Case involves misconduct by Vern A. Breland (the “Defendant”
or “Breland”),  the former Mayor of the Town of Sterlington, Louisiana (the
“Town” or “Sterlington”), in connection with its issuance of municipal bonds in
2017 and 2018.
 2. On April 27, 2017, the Town sold $4 million water and sewer utility
revenue bonds (“2017 Bonds”), and on September 28, 2018, it sold a $1.8 million
refunding bond (refunding  two 2015 water and sewer utility revenue bonds)
(“2018 Bonds”) (collectively, the “Bonds”).  The Bonds, which were sold in

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private placements to investors, were represented as intended to finance the
development of a water system for the Town and improvements to its existing
sewer system.
 3. As required by Louisiana law, the Town applied to the Louisiana State
Bond Commission (“SBC”) for its approval of these bond offerings.  Upon
Breland’s approval of each, the Town’s applications for the 2017 Bonds and 2018
Bonds were submitted to the SBC on January 18, 2017, and July 18, 2018,
respectively.
 4. In support of each application, the Town submitted false financial
projections about the anticipated revenue of the Town’s sewer system.  Breland
actively participated in and knowingly approved the false projections, which were
created by the Town’s municipal adviser, Twin Spires Financial, LLC (“Twin
Spires”) and its owner and sole employee, Aaron Fletcher (“Fletcher”), and misled
the SBC as to the Town’s ability to cover its debt service for the proposed bonds.
Investors in the 2017 Bonds and 2018 Bonds were not informed that the Town had
obtained SBC approval of the Bonds based on false projections.
 5. In addition, the Town and Breland did not disclose to investors in the
2017 Bonds and 2018 Bonds that the Town, at Breland’s direction, misused over
$3 million from earlier bond offerings.

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 6. As a result of this conduct, Breland violated Sections 17(a)(1) and
17(a)(3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)(1)
and (3)];  Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”)
[15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; and,
aided and abetted the Town’s violation of Section 17(a)(2) of the Securities Act
[15 U.S.C. § 77q(a)(2)].
DEFENDANT
 7. Vern A. Breland, age 59, is a resident of Columbia, Louisiana.
Breland was elected as the Town’s Mayor in 2006 and resigned from office on
October 1, 2018. On August 7, 2020, a Louisiana grand jury charged Breland for
“malfeasance in office (a felony) between the dates of January 1
st
, 2017 and
including September 30, 2018, willfully and unlawfully perform, refuse or fail to
perform his duty as a public officer, contrary to the provisions of R.S. 14:134.”
The charge is based on the Town’s misuse of bond proceeds directed by Breland
and the case is still pending.
OTHER RELEVANT INDIVIDUAL AND ENTITIES
 8. Sterlington,   Louisiana is   a   town   with   a   current   population   of
approximately 2,600 citizens located in the central northeastern part of the State of
Louisiana.  It is governed by an elected mayor and a five member board of aldermen.

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 9. Aaron B. Fletcher is a resident of Frisco, TX.  He wholly owns Twin
Spires and is its sole employee and director.
 10. Twin Spires Financial LLC is a Texas company formed in July
2015, with its principal place of business in Frisco, TX.  During the relevant
period, Twin Spires conducted business as a municipal advisor but was not
registered with the Commission.
JURISDICTION AND VENUE
 11. The SEC brings this action pursuant to authority conferred upon it by
Sections   20(b) and 20(d) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and
Sections   21(d) and 21(e) of the Exchange Act [15 U.S.C. §§ 78u(d) and 78(u)(e)].
 12. This Court has jurisdiction over this action pursuant to Section 22(a)
of the Securities Act [15 U.S.C. § 77v(a)] and Sections 21(d), 21(e), and 27 of the
Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
 13. Venue is proper in this District, because Sterlington is located within
this District and the acts constituting violations of the federal securities laws
alleged in this Complaint occurred within this District.
 14. In connection with the conduct described in this Complaint,
Defendant directly or indirectly made use of the mails, the means and
instrumentalities of interstate commerce, or the means or instruments of
transportation or communication in interstate commerce.

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FACTUAL ALLEGATIONS
Sterlington Issued 2017 and 2018 Municipal Bonds to Finance
 Its Sewer and Water Projects

 15. Beginning  in or  about  2015,  Breland  and  the  Town began  municipal
projects   to   upgrade   the   Town’s   existing   sewer   system,   purchase   the   water
distribution  system  for  its  residents  from  a  third-party  entity  (which  owned  and
operated it since 1965), and build a water treatment facility.
 16. To  fund  these  projects,  Breland  and  the  Town  decided  to  pursue
municipal  bond  offerings  to  raise  the  necessary  funds.    In  June  2015,  Breland
executed  a  financial  advisory  agreement  between  the  Town  and  Twin  Spires
pursuant to which Twin Spires agreed to provide, among other municipal advisory
services for the Town, advice on various forms of debt financing.
 17. In April 2017, the Town sold the 2017 Bonds ($4 million Utility
Revenue Bonds, which included $3.5 million Utility Revenue Bonds, Series 2017A
(Tax Exempt) and $500,000 Taxable Utility Revenue Bonds, Series 2017B).  In
September 2018, the Town sold the 2018 Bonds ($1.845 million of Wastewater,
Water and Sewer Treatment Utilities Revenue Bonds, Series 2018).
Overstatement of Sewer Customer and Revenue Projections
In Application to SBC

 18. Prior to issuing municipal bonds or incurring any form of debt,
Sterlington was required, by the Louisiana Constitution and state law, to obtain

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approval of the SBC.  As part of the approval process, the SBC requires the
applicant to demonstrate that the debt service coverage ratio (“DSCR”) for all its
outstanding debt (including the proposed debt incurrence) would be at least 1.0 in
the year of the highest annual future debt service payment based on projected net
income for the next full year subsequent to submission of the application.  DSCR is
a ratio of net operating income to debt service obligations.
 19. In both 2017 and 2018, the Town submitted an application to the SBC
supported by, among other items, sewer and water system revenue and expense
projections for the next full year, and expected aggregate debt service payments for
all outstanding debt secured by sewer and water system revenues (including the
proposed bond issuance), which were utilized to calculate the Town’s DSCR.
 20. The financial projections provided to the SBC included detailed
estimates of the Town’s revenue and operating expenses for the both the sewer and
water systems on an annual basis, and annual expected debt service payments for
all the Town’s outstanding debt, including the proposed offering.  The projections
included two prior fiscal years and the current fiscal year of the SBC application
and each fiscal year thereafter through the maturity dates of outstanding debt and
the proposed offering.
  21. The financial projections were prepared by Twin Spires, Fletcher and
Breland, and submitted by the Town to the SBC for approval of the 2017 Bonds.

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The projections were false and misleading.  The projections included an
intentionally overstated sewer revenue projection for 2018.  The overstated sewer
revenue projection allowed Sterlington to falsely exceed a DSCR of 1.0 and obtain
SBC approval for the proposed 2017 Bonds.
 22. Breland and Fletcher fraudulently projected that the Town would have
2,040 sewer customers in 2018 (and sewer system revenue of $864,693). Breland
and Fletcher were aware that the customer projection was more than double
Sterlington’s then-actual sewer customer number of 960 in 2016 (a 113%
increase).
 23. Breland and Fletcher plugged the 2,040 projected 2018 sewer
customer number to reach the sewer revenue required to meet a DSCR of 1.0.  As a
result of the overstated projected customer number, the Town’s application falsely
showed a projected DSCR of 1.02.  Fletcher and Breland had no reasonable basis
or support for the projection.
 24. Breland and Fletcher also took steps to mask the false 2018
projection.  They increased the purported number of current sewer customers for
2016 (which were presented to SBC as actual amounts provided for historical
purposes) and 2017, in an attempt to smooth out the year-to-year trend of sewer
customers so that Fletcher’s extremely high 2018 sewer customer projection would
appear more realistic.  For example, Fletcher’s financial projections in the SBC

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application represented that the Town had 1,574 sewer customers for 2016.  The
Town’s December 2016 sewer records (the last full month prior to SBC application
date of January 2017) showed that the Town actually billed only 960 sewer
customers.
  25. Breland and Fletcher were aware of the actual historical sewer
customer numbers because the Town’s sewer clerk repeatedly provided them with
the actual number of customers and provided them with reports showing the
accurate number of customers.  Breland nevertheless participated in, reviewed and
approved Fletcher’s projections.
 26. On February 16, 2017, the SBC approved the Town’s 2017 bond
offering.  The SBC relies on the municipal issuer and its professionals to provide
accurate and complete information.  The SBC was not aware that the DSCR was
based on false and misleading projections and as such, it would not have approved
the issuance of the 2017 Bonds.
 27. In a private placement on April 27, 2017, the Town sold the 2017
Bonds to two banks and a state lending authority.  The total issuance was $4
million.
  28. On July 18, 2018, the Town submitted another SBC application based
on similar projections for approval of the 2018 Bonds ($1.8 million Wastewater,
Water and Sewer Treatment Utilities Revenue Bonds) to refund a 2015 bond

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issuance. The 2015 Bonds that were to be refunded were Series A and B, Water
Treatment and Utilities Revenue Bond ($500,000) and Wastewater and Sewer
Treatment Utilities Revenue Bond ($1.2M) (“2015 Bonds”).
 29. The SBC application for the 2018 Bonds was initially prepared by
Twin Spires and Fletcher.  As with the 2017 application, the 2018 application was
reviewed and approved by Breland.  Breland was aware that the 2018 application
also included an overstated sewer system revenue projection similar to the
application for the 2017 Bonds.  It fraudulently projected, among other items, that
Sterlington would have 2,204 sewer customers for 2019 (now the relevant year for
the DSCR calculation).  This amount, without any support or justification for the
increase, was significantly higher than the Town’s 1,076 actual sewer customers as
of June 30, 2018.
 30. The false and misleading projection caused the Town to overstate its
2019 projected sewer system revenue by approximately $300,000.  The false
projection resulted in a DSCR of 1.1, over the 1.0 necessary for SBC approval.
Without the overstated sewer revenue, the DSCR would have been well below 1.0,
and the bond issuance would not have received the necessary SBC approval.
 31. On August 16, 2018, the SBC approved the bond offering.  On
September 28, 2018, the Town privately placed the 2018 Bonds with a single bank
investor.

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Defendant and Sterlington Did Not Disclose that the SBC Approvals Were
 Based on Fraudulently Overstated Sewer Revenue Projections

 32. In connection with the sale of the 2017 Bonds and the 2018 Bonds,
each of the investors were informed that Sterlington had, as required by law,
obtained SBC approval prior to issuing the Bonds.
33.  As part of their process for soliciting investors to purchase the 2017
Bonds, Breland, through Fletcher,  sent one of the 2017 Bond investors a copy of
the SBC application, which had been submitted by the Town for the 2017 Bonds.
34.     In connection with soliciting investor interest in the 2018 Bonds,
Breland, through Fletcher,  sent the 2018 Bond investor a copy of the 2018 Bond
SBC application and affirmatively told the 2018 Bond investor in an email that the
“refunding was approved by Bond Commission.”
 35. In addition, at the closings for both offerings, the Town provided each
investor with a copy of the SBC approval certificate, representing that the SBC had
approved the Bonds.  For the 2017 Bonds, Breland also provided a certification
that the Bonds were “authorized by and issued in conformity with the requirements
of the Constitution and statutes of the State of Louisiana.”
 36. These communications and representations to investors about SBC
application and SBC approval were misleading because investors were not
informed that the SBC applications contained false information and that the SBC

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approvals had been obtained based on fraudulently overstated sewer revenue
projections.
 37. Breland was aware at all relevant times that SBC’s approval was
based on false financial projections.
Defendant and Sterlington Failed to Disclose Misuse of Proceeds
 From Previous Bond Issuances

38. Louisiana state law provides that bond proceeds constitute a trust fund
to be used exclusively for the purpose for which the bonds are authorized to be
issued.

Use of bond proceeds for unauthorized purposes is a violation of state law.
39.  At Breland’s direction, the Town used some of the proceeds from a
2015 bond offering for purposes different from the purposes for which the bonds
were authorized.   This misuse was not disclosed to investors in the 2017 and 2018
Bonds.   Similarly, Breland also directed the Town’s misuse of proceeds from the
2017 Bonds without disclosing this misuse to the 2018 Bond investor.
 40. In 2015, Sterlington issued $500,000 of water treatment and utilities
revenue bonds and $1.2 million of wastewater and utilities bonds (the “2015
Bonds”).
 41.  Pursuant to the bond ordinance for the $500,000 bond, the proceeds
were to be solely used for the purpose of acquiring, constructing and installing a
new water treatment facility with infrastructure improvements, extensions,

12

modifications and additions to the wastewater and sewer treatment system of
Sterlington.
 42. The bond ordinance for the $1.2 million bonds stated that the purpose
for the bond proceeds was for acquiring, constructing and installing improvements,
extensions and additions to the wastewater and sewer treatment system.
 43. Between January 2016 and August 2017, Breland directed Town
employees to spend approximately $432,000 of the 2015 Bond proceeds on
expenditures that were contrary to the bond ordinances and other investor
disclosures for those bond proceeds.  These improper expenditures included over
$65,000 on police cars and $205,000 on Sterlington’s payroll.
 44. Sterlington’s audited financial statements for the year ended
December 31, 2016, included a finding that Sterlington improperly spent $322,280
of the 2015 Bond proceeds.  In or about July 2017, the Town’s auditor notified the
Town of this finding.
 45. On August 29, 2017, Breland’s response to the finding, on behalf of
the Town, was that the Town planned to repay all the funds by December 31, 2017.
 46.  Sterlington’s records show that only $39,800 was repaid by the end
of 2017 and the remaining $282,480 was never repaid.
47.  From January 1, 2017 through August 29, 2017, Breland directed the
misuse of an additional $110,367 from the 2015 Bond proceeds.  As a result,

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Sterlington spent a total of $432,647 on items inconsistent with the stated purposes
for the 2015 Bonds.
 48. Prior to, and after Sterlington’s response to the audit finding,
Sterlington, at Breland’s direction, also used the proceeds of the 2017 Bonds
contrary to the stated purpose in the bond ordinance and other investor disclosures.
The stated purpose of the 2017 Bonds was to  “[construct] and [acquire] utility
improvements, extensions and replacements to the System, including utility
improvements to the Issuer’s new sports complex and other municipality owned
projects, including appurtenant equipment, accessories and additions to such works
of public improvement for the Issuer....”
 49. Between June 16, 2017 and September 10, 2018, Sterlington, at
Breland’s direction, spent $2,685,456 of the 2017 Bond proceeds, including
$2,176,506 on projects related to its sports complex that had nothing to do with the
sewer or water system, and $362,184 on legal fees.  These uses were inconsistent
with the stated purposes for the 2017 Bonds.
 50. In documents provided to investors in both the 2017 and 2018 Bonds,
the Town and Breland made statements as to the intended use of bond proceeds.
The Town and Breland failed to disclose their prior and ongoing practice of using
bond proceeds in a manner inconsistent with the use disclosed to investors.

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 51. The Bonds were revenue bonds, intended to improve revenue
producing water and sewer systems.  The revenues from these systems were
described as the source of repayment for the Bonds.  The Town’s prior practice of
misusing proceeds presented a risk that the Town would misuse proceeds in the
2017 and 2018 Bonds.  The use of proceeds for non-Bond purposes presented a
risk to the successful completion and operation of the projects and a risk to
repayment.
FIRST CLAIM FOR RELIEF

Fraud in the Offer or Sale of Securities
Section 17(a)(1) of the Securities Act
 The SEC incorporates the allegations in paragraphs 1 through 51 as if fully
set forth herein.
 52. By engaging in the acts and conduct alleged herein, Defendant, directly
or indirectly, in the offer or sale of securities, by the use of any means or instruments
of transportation or communication in interstate commerce or by use of the mails,
has knowingly or with severe recklessness employed a device, scheme, or artifice to
defraud.
 53. By  the  reason  of  the  foregoing,  Defendant  violated  and,  unless
restrained and enjoined, will continue to violate Section 17(a)(1) of the Securities
Act [15 U.S.C. § 77q(a)(1)].

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SECOND CLAIM FOR RELIEF

Fraud in the Offer or Sale of Securities
Section 17(a)(3) of the Securities Act
 The SEC incorporates the allegations in paragraphs 1 through 51 as if fully
set forth herein.
 54. By engaging in the acts and conduct alleged herein, Defendant, directly
or indirectly, in the offer or sale of securities, by the use of any means or instruments
of transportation or communication in interstate commerce or by use of the mails,
has  knowingly,  recklessly,  or  negligently  engaged  in  a  transaction,  practice,  or
course of business which operated or would operate as a fraud or deceit upon the
purchaser.
 55. By  the  reason  of  the  foregoing,  Defendant  violated  and,  unless
restrained and enjoined, will continue to violate Section 17(a)(3) of the Securities
Act [15 U.S.C. § 77q(a)(3)].

THIRD CLAIM FOR RELIEF

Fraud in Connection with the Purchase or Sale of Securities
Section 10(b) of the Exchange Act and Rule 10b-5 thereunder
 56 The SEC incorporates the allegations in paragraphs 1 through 51 as if
fully set forth herein.
 57. By engaging in the acts and conduct alleged herein, Defendant, directly
or indirectly, in connection with the purchase or sale of securities, by the use of any

16

means or instrumentality of interstate commerce, or of the mails or of any facility of
any national securities exchange:
a. employed a device, scheme, or artifice to defraud;
b. made  untrue  statements  of  material  facts  or  omitted  to  state
material  facts  necessary  in  order  to  make  the  statements  made,  in  light  of  the
circumstances under which they were made, not misleading; and,
c. engaged in an act, practice, or course of business which operated
or would operate as a fraud or deceit upon any person.
58.      Defendant knowingly, intentionally, and/or recklessly engaged in the
aforementioned devices, schemes and artifices to defraud, made untrue statements of
material facts and omitted to state material facts, and engaged in fraudulent acts,
practices and courses of business.  In engaging in such conduct, Defendant acted
with scienter, that is, with an intent to deceive, manipulate or defraud or with a severe
reckless disregard for the truth.
 59.  By reason of the foregoing, Defendant violated and, unless restrained
and enjoined, will continue to violate 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].

17

FOURTH CLAIM FOR RELIEF

Aiding and Abetting Liability against Breland for
Sterlington’s Violation of Section 17(a)(2) of the Securities Act

60. The SEC incorporates the allegations in paragraphs 1 through 51 as if
fully set forth herein.
61.  By the above described conduct, Sterlington, in the offer and sale of
securities described herein, by use of means and instruments of transportation and
communication in interstate commerce and by use of the mails, directly and
indirectly, obtained money and property by means of untrue statements of material
fact and omissions to state material facts necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
62. By reason of the foregoing, Sterlington violated Section 17(a)(2) of
the Securities Act.
63. Breland was aware of, or recklessly disregarded, that Sterlington’s
conduct was improper and rendered Sterlington substantial assistance in this
conduct.
64. By reason of the foregoing, Breland aided and abetted and, unless
enjoined will continue to aid and abet, violations of Section 17(a)(2) of the
Securities Act [15 U.S.C. § 77q(a)(2)].

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RELIEF REQUESTED
 WHEREFORE,   the   SEC   respectfully   requests   that   this   Court   enter   a
judgment:
I.
 Permanently enjoining, pursuant to Rule 65(d) of the Federal Rules of Civil
Procedure, the Defendant from violating, directly or indirectly, Section 17(a) of the
Securities  Act  [15  U.S.C.  §  77q(a)]  and  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].
II.
 Ordering  Defendant  to  pay  a  civil  penalty  pursuant  to  Section  20(d)  of  the
Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15
U.S.C. § 78u(d)(3)].
III.
 Permanently restraining and enjoining Defendant from directly, or indirectly,
(i)  participating  in  any  issuance,  purchase,  offer,  or  sale  of  municipal  securities,
including  but  not  limited  to  engaging  or  communicating  with  a  broker,  dealer,
municipal securities dealer, municipal advisor, bond insurer, nationally recognized
statistical  rating  organization,  investor,  issuer  or  obligated  person  for  purposes  of
issuing, purchasing, offering, or selling any municipal security; and (ii) participating
in  the  preparation  of  any  materials  or  information  which  Defendant  should

19

reasonably expect to be submitted to the Municipal Securities Rulemaking Board’s
Electronic  Municipal  Market  Access  system  in  connection  with  an  offering  or  a
continuing  disclosure  obligation,  or  which  Defendant  should  reasonably  expect  to
be  provided  to  investors  in  connection  with  any  offering  (including  a  private
placement) of municipal securities, provided however, that such injunction shall not
prevent  Defendant  from  purchasing  or  selling  municipal  securities  for  his  own
personal account.
IV.
 Ordering Defendant to provide a copy of the judgment by email or mail
within 10 days of the entry of the judgment to any issuer of municipal securities or
obligated person with which Defendant is employed as of the date of the entry of
the judgment.
V.
 Retaining jurisdiction over this action to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or
motion for additional relief within the jurisdiction of this Court.

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VI.
 Granting such other and further relief as this Court deems just and appropriate.
Dated:  June 2, 2022.
       Respectfully submitted,
   /s/William P. Hicks
       William P. Hicks
       Senior Trial Counsel
       Georgia Bar No. 351649
       [email protected]

       M. Graham Loomis
       Regional Trial Counsel
       Georgia Bar No. 457868
       [email protected]

United States Securities and Exchange Commission
950 E. Paces Ferry Road NE
Suite 900
Atlanta, GA 30326
404-842-7600

UNITED STATES DISTRICT COURT 
 FOR THE WESTERN DISTRICT OF LOUISIANA 

 
____________________________________________ 

) 
SECURITIES AND EXCHANGE COMMISSION, ) 
   )    

  } 
  Plaintiff,       ) Civil Action No.:    

)   
 v.      ) 

) 
VERN A. BRELAND,   )    

   ) 
Defendant.   ) 

_____________________________________________  
 

COMPLAINT  
 

Plaintiff United States Securities and Exchange Commission (the “SEC”) 

alleges: 

SUMMARY OF ALLEGATIONS 

 1. This Case involves misconduct by Vern A. Breland (the “Defendant” 

or “Breland”), the former Mayor of the Town of Sterlington, Louisiana (the 

“Town” or “Sterlington”), in connection with its issuance of municipal bonds in 

2017 and 2018.  

 2. On April 27, 2017, the Town sold $4 million water and sewer utility 

revenue bonds (“2017 Bonds”), and on September 28, 2018, it sold a $1.8 million 

refunding bond (refunding  two 2015 water and sewer utility revenue bonds) 

(“2018 Bonds”) (collectively, the “Bonds”).  The Bonds, which were sold in 

Case 3:22-cv-01470   Document 1   Filed 06/02/22   Page 1 of 20 PageID #:  1



 

2 
 

private placements to investors, were represented as intended to finance the 

development of a water system for the Town and improvements to its existing 

sewer system.   

 3. As required by Louisiana law, the Town applied to the Louisiana State 

Bond Commission (“SBC”) for its approval of these bond offerings.  Upon 

Breland’s approval of each, the Town’s applications for the 2017 Bonds and 2018 

Bonds were submitted to the SBC on January 18, 2017, and July 18, 2018, 

respectively.   

 4. In support of each application, the Town submitted false financial 

projections about the anticipated revenue of the Town’s sewer system.  Breland 

actively participated in and knowingly approved the false projections, which were 

created by the Town’s municipal adviser, Twin Spires Financial, LLC (“Twin 

Spires”) and its owner and sole employee, Aaron Fletcher (“Fletcher”), and misled 

the SBC as to the Town’s ability to cover its debt service for the proposed bonds.  

Investors in the 2017 Bonds and 2018 Bonds were not informed that the Town had 

obtained SBC approval of the Bonds based on false projections.   

 5. In addition, the Town and Breland did not disclose to investors in the 

2017 Bonds and 2018 Bonds that the Town, at Breland’s direction, misused over 

$3 million from earlier bond offerings.  

Case 3:22-cv-01470   Document 1   Filed 06/02/22   Page 2 of 20 PageID #:  2



 

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 6. As a result of this conduct, Breland violated Sections 17(a)(1) and 

17(a)(3) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)(1) 

and (3)]; Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) 

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

aided and abetted the Town’s violation of Section 17(a)(2) of the Securities Act 

[15 U.S.C. § 77q(a)(2)]. 

DEFENDANT 

 7. Vern A. Breland, age 59, is a resident of Columbia, Louisiana.  

Breland was elected as the Town’s Mayor in 2006 and resigned from office on 

October 1, 2018. On August 7, 2020, a Louisiana grand jury charged Breland for 

“malfeasance in office (a felony) between the dates of January 1st, 2017 and 

including September 30, 2018, willfully and unlawfully perform, refuse or fail to 

perform his duty as a public officer, contrary to the provisions of R.S. 14:134.”  

The charge is based on the Town’s misuse of bond proceeds directed by Breland 

and the case is still pending. 

OTHER RELEVANT INDIVIDUAL AND ENTITIES 

 8. Sterlington, Louisiana is a town with a current population of 

approximately 2,600 citizens located in the central northeastern part of the State of 

Louisiana.  It is governed by an elected mayor and a five member board of aldermen.   

Case 3:22-cv-01470   Document 1   Filed 06/02/22   Page 3 of 20 PageID #:  3



 

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 9. Aaron B. Fletcher is a resident of Frisco, TX.  He wholly owns Twin 

Spires and is its sole employee and director.   

 10. Twin Spires Financial LLC is a Texas company formed in July 

2015, with its principal place of business in Frisco, TX.  During the relevant 

period, Twin Spires conducted business as a municipal advisor but was not 

registered with the Commission. 

JURISDICTION AND VENUE 

 11. The SEC brings this action pursuant to authority conferred upon it by 

Sections 20(b) and 20(d) of the Securities Act [15 U.S.C. §§ 77t(b) and 77t(d)] and 

Sections 21(d) and 21(e) of the Exchange Act [15 U.S.C. §§ 78u(d) and 78(u)(e)].  

 12. This Court has jurisdiction over this action pursuant to Section 22(a) 

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

Exchange Act [15 U.S.C. §§ 78u(d), 78u(e), and 78aa]. 

 13. Venue is proper in this District, because Sterlington is located within 

this District and the acts constituting violations of the federal securities laws 

alleged in this Complaint occurred within this District. 

 14. In connection with the conduct described in this Complaint, 

Defendant directly or indirectly made use of the mails, the means and 

instrumentalities of interstate commerce, or the means or instruments of 

transportation or communication in interstate commerce.   

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FACTUAL ALLEGATIONS 

Sterlington Issued 2017 and 2018 Municipal Bonds to Finance 
 Its Sewer and Water Projects 

 
 15. Beginning in or about 2015, Breland and the Town began municipal 

projects to upgrade the Town’s existing sewer system, purchase the water 

distribution system for its residents from a third-party entity (which owned and 

operated it since 1965), and build a water treatment facility.   

 16. To fund these projects, Breland and the Town decided to pursue 

municipal bond offerings to raise the necessary funds.  In June 2015, Breland 

executed a financial advisory agreement between the Town and Twin Spires 

pursuant to which Twin Spires agreed to provide, among other municipal advisory 

services for the Town, advice on various forms of debt financing. 

 17. In April 2017, the Town sold the 2017 Bonds ($4 million Utility 

Revenue Bonds, which included $3.5 million Utility Revenue Bonds, Series 2017A 

(Tax Exempt) and $500,000 Taxable Utility Revenue Bonds, Series 2017B).  In 

September 2018, the Town sold the 2018 Bonds ($1.845 million of Wastewater, 

Water and Sewer Treatment Utilities Revenue Bonds, Series 2018).     

Overstatement of Sewer Customer and Revenue Projections  
In Application to SBC 

 
 18. Prior to issuing municipal bonds or incurring any form of debt, 

Sterlington was required, by the Louisiana Constitution and state law, to obtain 

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approval of the SBC.  As part of the approval process, the SBC requires the 

applicant to demonstrate that the debt service coverage ratio (“DSCR”) for all its 

outstanding debt (including the proposed debt incurrence) would be at least 1.0 in 

the year of the highest annual future debt service payment based on projected net 

income for the next full year subsequent to submission of the application.  DSCR is 

a ratio of net operating income to debt service obligations. 

 19. In both 2017 and 2018, the Town submitted an application to the SBC 

supported by, among other items, sewer and water system revenue and expense 

projections for the next full year, and expected aggregate debt service payments for 

all outstanding debt secured by sewer and water system revenues (including the 

proposed bond issuance), which were utilized to calculate the Town’s DSCR. 

 20. The financial projections provided to the SBC included detailed 

estimates of the Town’s revenue and operating expenses for the both the sewer and 

water systems on an annual basis, and annual expected debt service payments for 

all the Town’s outstanding debt, including the proposed offering.  The projections 

included two prior fiscal years and the current fiscal year of the SBC application 

and each fiscal year thereafter through the maturity dates of outstanding debt and 

the proposed offering.  

  21. The financial projections were prepared by Twin Spires, Fletcher and 

Breland, and submitted by the Town to the SBC for approval of the 2017 Bonds.  

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The projections were false and misleading.  The projections included an 

intentionally overstated sewer revenue projection for 2018.  The overstated sewer 

revenue projection allowed Sterlington to falsely exceed a DSCR of 1.0 and obtain 

SBC approval for the proposed 2017 Bonds. 

 22. Breland and Fletcher fraudulently projected that the Town would have 

2,040 sewer customers in 2018 (and sewer system revenue of $864,693). Breland 

and Fletcher were aware that the customer projection was more than double 

Sterlington’s then-actual sewer customer number of 960 in 2016 (a 113% 

increase).   

 23. Breland and Fletcher plugged the 2,040 projected 2018 sewer 

customer number to reach the sewer revenue required to meet a DSCR of 1.0.  As a 

result of the overstated projected customer number, the Town’s application falsely 

showed a projected DSCR of 1.02.  Fletcher and Breland had no reasonable basis 

or support for the projection.   

 24. Breland and Fletcher also took steps to mask the false 2018 

projection.  They increased the purported number of current sewer customers for 

2016 (which were presented to SBC as actual amounts provided for historical 

purposes) and 2017, in an attempt to smooth out the year-to-year trend of sewer 

customers so that Fletcher’s extremely high 2018 sewer customer projection would 

appear more realistic.  For example, Fletcher’s financial projections in the SBC 

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application represented that the Town had 1,574 sewer customers for 2016.  The 

Town’s December 2016 sewer records (the last full month prior to SBC application 

date of January 2017) showed that the Town actually billed only 960 sewer 

customers. 

  25. Breland and Fletcher were aware of the actual historical sewer 

customer numbers because the Town’s sewer clerk repeatedly provided them with 

the actual number of customers and provided them with reports showing the 

accurate number of customers.  Breland nevertheless participated in, reviewed and 

approved Fletcher’s projections.  

 26. On February 16, 2017, the SBC approved the Town’s 2017 bond 

offering.  The SBC relies on the municipal issuer and its professionals to provide 

accurate and complete information.  The SBC was not aware that the DSCR was 

based on false and misleading projections and as such, it would not have approved 

the issuance of the 2017 Bonds.   

 27. In a private placement on April 27, 2017, the Town sold the 2017 

Bonds to two banks and a state lending authority.  The total issuance was $4 

million.  

  28. On July 18, 2018, the Town submitted another SBC application based 

on similar projections for approval of the 2018 Bonds ($1.8 million Wastewater, 

Water and Sewer Treatment Utilities Revenue Bonds) to refund a 2015 bond 

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issuance. The 2015 Bonds that were to be refunded were Series A and B, Water 

Treatment and Utilities Revenue Bond ($500,000) and Wastewater and Sewer 

Treatment Utilities Revenue Bond ($1.2M) (“2015 Bonds”). 

 29. The SBC application for the 2018 Bonds was initially prepared by 

Twin Spires and Fletcher.  As with the 2017 application, the 2018 application was 

reviewed and approved by Breland.  Breland was aware that the 2018 application 

also included an overstated sewer system revenue projection similar to the 

application for the 2017 Bonds.  It fraudulently projected, among other items, that 

Sterlington would have 2,204 sewer customers for 2019 (now the relevant year for 

the DSCR calculation).  This amount, without any support or justification for the 

increase, was significantly higher than the Town’s 1,076 actual sewer customers as 

of June 30, 2018.   

 30. The false and misleading projection caused the Town to overstate its 

2019 projected sewer system revenue by approximately $300,000.  The false 

projection resulted in a DSCR of 1.1, over the 1.0 necessary for SBC approval.  

Without the overstated sewer revenue, the DSCR would have been well below 1.0, 

and the bond issuance would not have received the necessary SBC approval.   

 31. On August 16, 2018, the SBC approved the bond offering.  On 

September 28, 2018, the Town privately placed the 2018 Bonds with a single bank 

investor.  

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Defendant and Sterlington Did Not Disclose that the SBC Approvals Were 
 Based on Fraudulently Overstated Sewer Revenue Projections 

 
 32. In connection with the sale of the 2017 Bonds and the 2018 Bonds, 

each of the investors were informed that Sterlington had, as required by law, 

obtained SBC approval prior to issuing the Bonds.   

33.  As part of their process for soliciting investors to purchase the 2017 

Bonds, Breland, through Fletcher, sent one of the 2017 Bond investors a copy of 

the SBC application, which had been submitted by the Town for the 2017 Bonds.   

34.  In connection with soliciting investor interest in the 2018 Bonds, 

Breland, through Fletcher, sent the 2018 Bond investor a copy of the 2018 Bond 

SBC application and affirmatively told the 2018 Bond investor in an email that the 

“refunding was approved by Bond Commission.”   

 35. In addition, at the closings for both offerings, the Town provided each 

investor with a copy of the SBC approval certificate, representing that the SBC had 

approved the Bonds.  For the 2017 Bonds, Breland also provided a certification 

that the Bonds were “authorized by and issued in conformity with the requirements 

of the Constitution and statutes of the State of Louisiana.”   

 36. These communications and representations to investors about SBC 

application and SBC approval were misleading because investors were not 

informed that the SBC applications contained false information and that the SBC 

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approvals had been obtained based on fraudulently overstated sewer revenue 

projections.  

 37. Breland was aware at all relevant times that SBC’s approval was 

based on false financial projections.     

Defendant and Sterlington Failed to Disclose Misuse of Proceeds 
 From Previous Bond Issuances  

 
38. Louisiana state law provides that bond proceeds constitute a trust fund 

to be used exclusively for the purpose for which the bonds are authorized to be 

issued.  Use of bond proceeds for unauthorized purposes is a violation of state law.   

39.  At Breland’s direction, the Town used some of the proceeds from a 

2015 bond offering for purposes different from the purposes for which the bonds 

were authorized.   This misuse was not disclosed to investors in the 2017 and 2018 

Bonds.   Similarly, Breland also directed the Town’s misuse of proceeds from the 

2017 Bonds without disclosing this misuse to the 2018 Bond investor.  

 40. In 2015, Sterlington issued $500,000 of water treatment and utilities 

revenue bonds and $1.2 million of wastewater and utilities bonds (the “2015 

Bonds”).    

 41.  Pursuant to the bond ordinance for the $500,000 bond, the proceeds 

were to be solely used for the purpose of acquiring, constructing and installing a 

new water treatment facility with infrastructure improvements, extensions, 

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modifications and additions to the wastewater and sewer treatment system of 

Sterlington.   

 42. The bond ordinance for the $1.2 million bonds stated that the purpose 

for the bond proceeds was for acquiring, constructing and installing improvements, 

extensions and additions to the wastewater and sewer treatment system.  

 43. Between January 2016 and August 2017, Breland directed Town 

employees to spend approximately $432,000 of the 2015 Bond proceeds on 

expenditures that were contrary to the bond ordinances and other investor 

disclosures for those bond proceeds.  These improper expenditures included over 

$65,000 on police cars and $205,000 on Sterlington’s payroll. 

 44. Sterlington’s audited financial statements for the year ended 

December 31, 2016, included a finding that Sterlington improperly spent $322,280 

of the 2015 Bond proceeds.  In or about July 2017, the Town’s auditor notified the 

Town of this finding.   

 45. On August 29, 2017, Breland’s response to the finding, on behalf of 

the Town, was that the Town planned to repay all the funds by December 31, 2017.  

 46.  Sterlington’s records show that only $39,800 was repaid by the end 

of 2017 and the remaining $282,480 was never repaid.  

47.  From January 1, 2017 through August 29, 2017, Breland directed the 

misuse of an additional $110,367 from the 2015 Bond proceeds.  As a result, 

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Sterlington spent a total of $432,647 on items inconsistent with the stated purposes 

for the 2015 Bonds.  

 48. Prior to, and after Sterlington’s response to the audit finding, 

Sterlington, at Breland’s direction, also used the proceeds of the 2017 Bonds 

contrary to the stated purpose in the bond ordinance and other investor disclosures.  

The stated purpose of the 2017 Bonds was to  “[construct] and [acquire] utility 

improvements, extensions and replacements to the System, including utility 

improvements to the Issuer’s new sports complex and other municipality owned 

projects, including appurtenant equipment, accessories and additions to such works 

of public improvement for the Issuer….”  

 49. Between June 16, 2017 and September 10, 2018, Sterlington, at 

Breland’s direction, spent $2,685,456 of the 2017 Bond proceeds, including 

$2,176,506 on projects related to its sports complex that had nothing to do with the 

sewer or water system, and $362,184 on legal fees.  These uses were inconsistent 

with the stated purposes for the 2017 Bonds.   

 50. In documents provided to investors in both the 2017 and 2018 Bonds, 

the Town and Breland made statements as to the intended use of bond proceeds.  

The Town and Breland failed to disclose their prior and ongoing practice of using 

bond proceeds in a manner inconsistent with the use disclosed to investors.   

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 51. The Bonds were revenue bonds, intended to improve revenue 

producing water and sewer systems.  The revenues from these systems were 

described as the source of repayment for the Bonds.  The Town’s prior practice of 

misusing proceeds presented a risk that the Town would misuse proceeds in the 

2017 and 2018 Bonds.  The use of proceeds for non-Bond purposes presented a 

risk to the successful completion and operation of the projects and a risk to 

repayment. 

FIRST CLAIM FOR RELIEF 
 

Fraud in the Offer or Sale of Securities  
Section 17(a)(1) of the Securities Act  

 The SEC incorporates the allegations in paragraphs 1 through 51 as if fully 

set forth herein. 

 52. By engaging in the acts and conduct alleged herein, Defendant, directly 

or indirectly, in the offer or sale of securities, by the use of any means or instruments 

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

has knowingly or with severe recklessness employed a device, scheme, or artifice to 

defraud. 

 53. By the reason of the foregoing, Defendant violated and, unless 

restrained and enjoined, will continue to violate Section 17(a)(1) of the Securities 

Act [15 U.S.C. § 77q(a)(1)].   

 

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SECOND CLAIM FOR RELIEF 
 

Fraud in the Offer or Sale of Securities  
Section 17(a)(3) of the Securities Act  

 The SEC incorporates the allegations in paragraphs 1 through 51 as if fully 

set forth herein. 

 54. By engaging in the acts and conduct alleged herein, Defendant, directly 

or indirectly, in the offer or sale of securities, by the use of any means or instruments 

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

has knowingly, recklessly, or negligently engaged in a transaction, practice, or 

course of business which operated or would operate as a fraud or deceit upon the 

purchaser. 

 55. By the reason of the foregoing, Defendant violated and, unless 

restrained and enjoined, will continue to violate Section 17(a)(3) of the Securities 

Act [15 U.S.C. § 77q(a)(3)].   

 
THIRD CLAIM FOR RELIEF 

 
Fraud in Connection with the Purchase or Sale of Securities  

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

 56 The SEC incorporates the allegations in paragraphs 1 through 51 as if 

fully set forth herein. 

 57. By engaging in the acts and conduct alleged herein, Defendant, directly 

or indirectly, in connection with the purchase or sale of securities, by the use of any 

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means or instrumentality of interstate commerce, or of the mails or of any facility of 

any national securities exchange: 

a. employed a device, scheme, or artifice to defraud; 

b. made untrue statements of material facts or omitted to state 

material facts necessary in order to make the statements made, in light of the 

circumstances under which they were made, not misleading; and, 

c. engaged in an act, practice, or course of business which operated 

or would operate as a fraud or deceit upon any person. 

58.      Defendant knowingly, intentionally, and/or recklessly engaged in the 

aforementioned devices, schemes and artifices to defraud, made untrue statements of 

material facts and omitted to state material facts, and engaged in fraudulent acts, 

practices and courses of business.  In engaging in such conduct, Defendant acted 

with scienter, that is, with an intent to deceive, manipulate or defraud or with a severe 

reckless disregard for the truth. 

 59.  By reason of the foregoing, Defendant violated and, unless restrained 

and enjoined, will continue to violate 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]. 

  

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FOURTH CLAIM FOR RELIEF 
 

Aiding and Abetting Liability against Breland for  
Sterlington’s Violation of Section 17(a)(2) of the Securities Act  

 
60. The SEC incorporates the allegations in paragraphs 1 through 51 as if 

fully set forth herein. 

61.  By the above described conduct, Sterlington, in the offer and sale of 

securities described herein, by use of means and instruments of transportation and 

communication in interstate commerce and by use of the mails, directly and 

indirectly, obtained money and property by means of untrue statements of material 

fact and omissions to state material facts necessary in order to make the statements 

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

62. By reason of the foregoing, Sterlington violated Section 17(a)(2) of 

the Securities Act. 

63. Breland was aware of, or recklessly disregarded, that Sterlington’s 

conduct was improper and rendered Sterlington substantial assistance in this 

conduct. 

64. By reason of the foregoing, Breland aided and abetted and, unless 

enjoined will continue to aid and abet, violations of Section 17(a)(2) of the 

Securities Act [15 U.S.C. § 77q(a)(2)]. 

 

 

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RELIEF REQUESTED 

 WHEREFORE, the SEC respectfully requests that this Court enter a 

judgment: 

I. 

 Permanently enjoining, pursuant to Rule 65(d) of the Federal Rules of Civil 

Procedure, the Defendant from violating, directly or indirectly, Section 17(a) of the 

Securities Act [15 U.S.C. § 77q(a)] and 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].  

II. 

 Ordering Defendant to pay a civil penalty pursuant to Section 20(d) of the 

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

U.S.C. § 78u(d)(3)]. 

III. 

 Permanently restraining and enjoining Defendant from directly, or indirectly, 

(i) participating in any issuance, purchase, offer, or sale of municipal securities, 

including but not limited to engaging or communicating with a broker, dealer, 

municipal securities dealer, municipal advisor, bond insurer, nationally recognized 

statistical rating organization, investor, issuer or obligated person for purposes of 

issuing, purchasing, offering, or selling any municipal security; and (ii) participating 

in the preparation of any materials or information which Defendant should 

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reasonably expect to be submitted to the Municipal Securities Rulemaking Board’s 

Electronic Municipal Market Access system in connection with an offering or a 

continuing disclosure obligation, or which Defendant should reasonably expect to 

be provided to investors in connection with any offering (including a private 

placement) of municipal securities, provided however, that such injunction shall not 

prevent Defendant from purchasing or selling municipal securities for his own 

personal account. 

IV. 

 Ordering Defendant to provide a copy of the judgment by email or mail 

within 10 days of the entry of the judgment to any issuer of municipal securities or 

obligated person with which Defendant is employed as of the date of the entry of 

the judgment. 

V. 

 Retaining jurisdiction over this action to implement and carry out the terms of 

all orders and decrees that may be entered, or to entertain any suitable application or 

motion for additional relief within the jurisdiction of this Court. 

  

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VI. 

 Granting such other and further relief as this Court deems just and appropriate. 

Dated:  June 2, 2022. 

       Respectfully submitted, 

   /s/William P. Hicks 
       William P. Hicks  
       Senior Trial Counsel 
       Georgia Bar No. 351649  
       [email protected] 
 
             
       M. Graham Loomis  
       Regional Trial Counsel  
       Georgia Bar No. 457868  
       [email protected] 
 
 

United States Securities and Exchange Commission 
950 E. Paces Ferry Road NE 
Suite 900 
Atlanta, GA 30326 
404-842-7600 

 

 

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mailto:[email protected]
mailto:[email protected]
mailto:[email protected]