In re CROSBY INDEPENDENT

 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933 
Release No. 11039 / March 16, 2022 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 94425 / March 16, 2022 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-20799 
 
 
In the Matter of 
 
CROSBY INDEPENDENT 
SCHOOL DISTRICT,  
 
Respondent. 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933 AND SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934, 
MAKING FINDINGS, AND IMPOSING A 
CEASE-AND-DESIST ORDER 
   
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 
Act”), against Crosby Independent School District (“Crosby,” the “District,” or “Respondent”). 
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “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 to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 
the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 
(“Order”), as set forth below.   
 
  

2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
A. SUMMARY 
 
1. In January 2018, Crosby Independent School District raised $20 million through the 
sale of municipal bonds (the “January 2018 Bonds”).  Crosby’s Official Statement for the January 
2018 Bonds, which was used to solicit interest from prospective investors, contained Crosby’s 
fiscal year 2017 audited financial statements.  Unknown to investors at the time, Crosby had failed 
to report payroll and construction liabilities totaling $11.7 million.  Consequently, Crosby’s 
audited financial statements falsely reported General Fund reserves of $5.4 million.  When these 
misstatements were discovered, Crosby declared financial exigency and the bonds were 
downgraded.   
 
2. Crosby knew that its payroll and construction liabilities were higher than the 
amounts recorded in its fiscal year 2017 audited financial statements.  Crosby, however, failed to 
determine the true amount of the liabilities and never informed its auditor that the fiscal year 2017 
payroll and construction liabilities were understated.  Nonetheless, Crosby submitted its fiscal year 
2017 audited financial statements to the bond financing team to be included in relevant offering 
documents, which were provided to prospective investors.        
 
3. Through this conduct and its misstatements, Crosby violated Section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act. 
 
B. RESPONDENT 
 
4. Crosby Independent School District is a public school district based in Crosby, 
Texas, a suburb located northeast of Houston, Texas.  Crosby operates seven schools and serves 
approximately 6,400 students.  It is governed by a seven-member elected Board of Trustees.  
Crosby operates on a July 1 to June 30 fiscal year.   
 
C. OTHER RELEVANT INDIVIDUAL 
 
5. Carla Merka age 57, is a resident of Dayton, Texas.  Merka served as Crosby’s 
Chief Financial Officer (“CFO”) from approximately March 2014 through May 2018.  As CFO, 
Merka had primary responsibility over Crosby’s bond, business, and finance programs, as well as 
its financial statements.  In approximately June 2018, Merka left Crosby for other employment.   
 
  
                                                 
1
   The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any 
other person or entity in this or any other proceeding.  

3 
D. FACTS 
 
Crosby’s Deteriorating Financial Condition and Change to Fiscal Year End 
 
6. In 2013, Crosby issued $86.5 million in municipal bonds (“2013 Bond”) to fund 
several capital projects.  Crosby knew that various project enhancements beyond the original scope 
of work inflated the total cost of the projects.  Consequently, the 2013 Bond proceeds were 
prematurely exhausted in fiscal year 2016 leaving the General Fund as the only source of funding 
for approximately $12 million of remaining construction commitments.  
 
7.  As of August 31, 2016 (Crosby’s then fiscal year-end), Crosby and Merka knew 
that the District’s General Fund lacked sufficient funds to cover the $12 million of unanticipated 
construction expenses required to complete its capital projects.  As a result, Crosby pursued two 
options to pay for the remaining construction costs: (1) Crosby changed its fiscal year-end date 
from August 31 to June 30, and (2) Crosby issued new municipal bonds.  
 
Crosby’s Fiscal Year 2017 Financial Statements Were Materially Misstated 
 
8. Crosby’s fiscal year 2017 financial statements materially understated liabilities and 
overstated the General Fund balance due to two significant failures: (1) failure to record 
construction expenses for completed capital projects, and (2) failure to record payroll expenses for 
unpaid teachers’ salaries.   
 
Crosby Understated Construction Expenses by $7.9 Million  
 
9. During the fiscal year 2017 audit, Crosby and Merka knew that the 2013 Bond 
proceeds had been completely consumed and Crosby would have to pay the remaining 
construction commitments from its General Fund.  Crosby and Merka also knew that Crosby’s 
capital projects had been substantially completed and that Crosby’s General Fund lacked sufficient 
funds to pay the estimated $8-$10 million in unpaid construction invoices.  In early June 2017, 
officers from Crosby discussed with its municipal advisor that it did not have enough funds to 
cover its normal operating expenses and the unpaid construction expenses.  On June 26, 2017, 
Crosby’s municipal advisor convened a call with officers from Crosby, including Merka, Crosby’s 
bond counsel, and Crosby’s auditor.  On that call, Crosby and its municipal advisor concluded that 
the District could not pay for its outstanding construction commitments without issuing new bonds.  
 
10. Crosby failed to accurately record its unpaid construction liability in the fiscal year 
2017 financial statements.  Crosby only recorded a construction liability of $727,000 despite 
knowing that the outstanding construction liability was much greater.  Merka failed to provide 
accurate information regarding Crosby’s construction expenses to the district’s auditor.  Merka 
reviewed and approved the fiscal year 2017 financial statements and signed a management 
representation letter falsely asserting that, among other things, the fiscal year 2017 financial 
statements were presented in accordance with GAAP and that the District’s net position and fund 
balance had been properly reported.     
 

4 
Crosby Understated Payroll Expenses by $3.8 million 
 
11. Crosby’s teacher salaries represented a majority of the District’s expenses. Teachers 
earn their salaries over a 10-month contract period corresponding with the start and end of the 
school year, though they were paid evenly over a 12-month period ending in mid-August.  Crosby 
was not required to record a payroll liability for teacher salaries when its fiscal year-end was 
August 31 because all teacher contracts had been paid in full as of that date.  Crosby changed its 
fiscal year-end date from August 31 to June 30 for multiple reasons, including a failed attempt to 
increase General Fund reserves and pay for the 2013 Bond construction projects.  When Crosby 
moved its fiscal year-end date, however, Crosby concluded fiscal year 2017 with unpaid payroll 
obligations related to the 2017 contract year (amounts paid in July 2017 and August 2017).  Crosby 
failed to include these unpaid payroll liabilities in its fiscal year 2017 financial statements. 
 
12. Crosby knew that the change in fiscal year-end date would result in a payroll 
liability for teacher salaries, but did not properly account for it.  Crosby and Merka also knew that 
Crosby’s auditor incorrectly believed that all contractual employees had been paid in full as of 
June 30, 2017.  Merka never corrected this misunderstanding, nor did Merka calculate her own 
payroll liability.  Instead, Crosby recorded only a $30,000 payroll liability related to hourly 
employees.  Merka knew that the payroll liability was understated, but still signed a management 
representation letter falsely asserting that, among other things, the fiscal year 2017 financial 
statements were presented in accordance with GAAP and that the District’s net position and fund 
balance had been properly reported.  
 
Crosby’s January 2018 Bond Documents Contained Material Misstatements and Omissions 
 
13. On January 18, 2018, Crosby issued $20 million of Unlimited Tax School Building 
Bonds to pay its outstanding construction liabilities and to fund new capital projects.  Crosby’s 
false and misleading fiscal year 2017 financial statements were appended to the official statement 
used to market the bonds to investors.  Crosby’s fiscal year 2017 audited financial statements 
understated payroll and construction liabilities by $3.8 million and $7.9 million, respectively.  
These errors resulted in an overstatement of Crosby’s General Fund reserves by $11.7 million.  
Most importantly, Crosby’s fiscal year 2017 financials reported a positive General Fund balance 
when it should have reported a negative one. Crosby’s official statement also disclosed information 
concerning the District’s fiscal year 2017 deficit.  The disclosures in this section of the official 
statement were false and misleading because they did not include the appropriate payroll and 
construction liabilities.   
 
14. As CFO, Merka had ultimate responsibility over Crosby’s fiscal year 2017 financial 
statements.  She was responsible for reporting on financial issues to Crosby’s Board and was 
Crosby’s primary contact during the bond financing process.  Merka and other officers from 
Crosby reviewed Crosby’s official statement prior to its release to prospective investors.  Crosby’s 
then Board President signed Crosby’s official statement used to market the bonds to investors.  
 
15. Crosby knew that its fiscal year 2017 financial statements were false and 
misleading, yet submitted them to the bond financing team for inclusion in the offering documents.  

5 
In fact, Merka did not invite its external auditor to meetings with the bond financing team despite 
Crosby’s municipal advisor making such a request.  Nor did Merka reveal in communications with 
ratings agencies the District’s true financial condition.   
 
Crosby’s Declaration of Financial Exigency, Rating Downgrades, and Restatement 
 
16. During spring 2018, Crosby continued to face cash flow shortages because of the 
additional construction expenses.  In June 2018, Crosby’s new CFO discovered the payroll and 
construction liability errors.  In August 2018, Crosby’s leadership disclosed the financial issues to 
its Board and the public, and began crafting a financial recovery plan with its municipal advisor.  
Beginning in September 2018, ratings agencies downgraded Crosby’s bonds. 
 
17. On October 8, 2018, Crosby declared a financial exigency and implemented a mid-
year reduction in force.  Crosby’s declaration of financial exigency required that a monitor from 
the Texas Education Agency oversee the District’s finances and efforts to achieve financial 
solvency; the monitor is still in place.  In February 2019, Crosby’s auditor issued its audit report 
for Crosby’s fiscal year 2018 financial statements, which included material restatements of the 
fiscal year 2017 ending balances and raised doubts about Crosby’s ability to continue as a going 
concern.    
 
18. Throughout the fall of 2018 and into 2019, the District’s new CFO and 
Superintendent executed on a short and long-term plan to help the District solve its financial 
problems.  These actions included budget cuts, a hiring freeze, reductions in force, examination of 
all expenses, and investigation of the previous conduct. 
 
E.  VIOLATIONS  
 
19. A statement or omission is material if there is a substantial likelihood that a 
reasonable investor would consider it important in making an investment decision.  Basic Inc. v. 
Levinson, 485 U.S. 224, 231-32 (1988). 
 
20. As a result of the conduct described above, Crosby violated Section 10(b) of the 
Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act.  Crosby, through 
the January 2018 Bond documents that appended the District’s false and misleading fiscal year 
2017 financial statements, made untrue statements of material fact or misleading omissions in 
connection with the purchase or sale of securities and in the offer or sale of such securities.  Crosby 
further engaged in transactions, practices, and a course of business that operated as a fraud or 
deceit on the investors in the January 2018 Bonds.  Crosby allowed the dissemination of the false 
and misleading financial statements and engaged in other actions that concealed the District’s 
financial distress at the time of the January 2018 bond sale.   
 
F.  CROSBY’S REMEDIAL EFFORTS AND COOPERATION 
 
21. In determining to accept the Offer, the Commission considered remedial acts 
undertaken by Respondent and cooperation afforded the Commission staff. 

6 
 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Crosby’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act that 
Respondent Crosby cease and desist from committing or causing any violations and any future 
violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 
10b-5 thereunder.   
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
Secretary 
 
 
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES ACT OF 1933 

Release No. 11039 / March 16, 2022 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 94425 / March 16, 2022 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-20799 

 

 

In the Matter of 

 

CROSBY INDEPENDENT 

SCHOOL DISTRICT,  

 

Respondent. 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933 AND SECTION 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

MAKING FINDINGS, AND IMPOSING A 

CEASE-AND-DESIST ORDER 

   

 

I. 
 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”), against Crosby Independent School District (“Crosby,” the “District,” or “Respondent”). 

 

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “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 to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings, Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 

the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 

(“Order”), as set forth below.   

 

  



2 

III. 
 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

A. SUMMARY 

 

1. In January 2018, Crosby Independent School District raised $20 million through the 

sale of municipal bonds (the “January 2018 Bonds”).  Crosby’s Official Statement for the January 

2018 Bonds, which was used to solicit interest from prospective investors, contained Crosby’s 

fiscal year 2017 audited financial statements.  Unknown to investors at the time, Crosby had failed 

to report payroll and construction liabilities totaling $11.7 million.  Consequently, Crosby’s 

audited financial statements falsely reported General Fund reserves of $5.4 million.  When these 

misstatements were discovered, Crosby declared financial exigency and the bonds were 

downgraded.   

 

2. Crosby knew that its payroll and construction liabilities were higher than the 

amounts recorded in its fiscal year 2017 audited financial statements.  Crosby, however, failed to 

determine the true amount of the liabilities and never informed its auditor that the fiscal year 2017 

payroll and construction liabilities were understated.  Nonetheless, Crosby submitted its fiscal year 

2017 audited financial statements to the bond financing team to be included in relevant offering 

documents, which were provided to prospective investors.        

 

3. Through this conduct and its misstatements, Crosby violated Section 10(b) of the 

Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act. 

 

B. RESPONDENT 
 

4. Crosby Independent School District is a public school district based in Crosby, 

Texas, a suburb located northeast of Houston, Texas.  Crosby operates seven schools and serves 

approximately 6,400 students.  It is governed by a seven-member elected Board of Trustees.  

Crosby operates on a July 1 to June 30 fiscal year.   

 

C. OTHER RELEVANT INDIVIDUAL 

 

5. Carla Merka age 57, is a resident of Dayton, Texas.  Merka served as Crosby’s 

Chief Financial Officer (“CFO”) from approximately March 2014 through May 2018.  As CFO, 

Merka had primary responsibility over Crosby’s bond, business, and finance programs, as well as 

its financial statements.  In approximately June 2018, Merka left Crosby for other employment.   

 

  

                                                 
1   The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any 

other person or entity in this or any other proceeding.  



3 

D. FACTS 

 

Crosby’s Deteriorating Financial Condition and Change to Fiscal Year End 

 

6. In 2013, Crosby issued $86.5 million in municipal bonds (“2013 Bond”) to fund 

several capital projects.  Crosby knew that various project enhancements beyond the original scope 

of work inflated the total cost of the projects.  Consequently, the 2013 Bond proceeds were 

prematurely exhausted in fiscal year 2016 leaving the General Fund as the only source of funding 

for approximately $12 million of remaining construction commitments.  

 

7.  As of August 31, 2016 (Crosby’s then fiscal year-end), Crosby and Merka knew 

that the District’s General Fund lacked sufficient funds to cover the $12 million of unanticipated 

construction expenses required to complete its capital projects.  As a result, Crosby pursued two 

options to pay for the remaining construction costs: (1) Crosby changed its fiscal year-end date 

from August 31 to June 30, and (2) Crosby issued new municipal bonds.  

 

Crosby’s Fiscal Year 2017 Financial Statements Were Materially Misstated 

 

8. Crosby’s fiscal year 2017 financial statements materially understated liabilities and 

overstated the General Fund balance due to two significant failures: (1) failure to record 

construction expenses for completed capital projects, and (2) failure to record payroll expenses for 

unpaid teachers’ salaries.   

 

Crosby Understated Construction Expenses by $7.9 Million  

 

9. During the fiscal year 2017 audit, Crosby and Merka knew that the 2013 Bond 

proceeds had been completely consumed and Crosby would have to pay the remaining 

construction commitments from its General Fund.  Crosby and Merka also knew that Crosby’s 

capital projects had been substantially completed and that Crosby’s General Fund lacked sufficient 

funds to pay the estimated $8-$10 million in unpaid construction invoices.  In early June 2017, 

officers from Crosby discussed with its municipal advisor that it did not have enough funds to 

cover its normal operating expenses and the unpaid construction expenses.  On June 26, 2017, 

Crosby’s municipal advisor convened a call with officers from Crosby, including Merka, Crosby’s 

bond counsel, and Crosby’s auditor.  On that call, Crosby and its municipal advisor concluded that 

the District could not pay for its outstanding construction commitments without issuing new bonds.  

 

10. Crosby failed to accurately record its unpaid construction liability in the fiscal year 

2017 financial statements.  Crosby only recorded a construction liability of $727,000 despite 

knowing that the outstanding construction liability was much greater.  Merka failed to provide 

accurate information regarding Crosby’s construction expenses to the district’s auditor.  Merka 

reviewed and approved the fiscal year 2017 financial statements and signed a management 

representation letter falsely asserting that, among other things, the fiscal year 2017 financial 

statements were presented in accordance with GAAP and that the District’s net position and fund 

balance had been properly reported.     

 



4 

Crosby Understated Payroll Expenses by $3.8 million 

 

11. Crosby’s teacher salaries represented a majority of the District’s expenses. Teachers 

earn their salaries over a 10-month contract period corresponding with the start and end of the 

school year, though they were paid evenly over a 12-month period ending in mid-August.  Crosby 

was not required to record a payroll liability for teacher salaries when its fiscal year-end was 

August 31 because all teacher contracts had been paid in full as of that date.  Crosby changed its 

fiscal year-end date from August 31 to June 30 for multiple reasons, including a failed attempt to 

increase General Fund reserves and pay for the 2013 Bond construction projects.  When Crosby 

moved its fiscal year-end date, however, Crosby concluded fiscal year 2017 with unpaid payroll 

obligations related to the 2017 contract year (amounts paid in July 2017 and August 2017).  Crosby 

failed to include these unpaid payroll liabilities in its fiscal year 2017 financial statements. 

 

12. Crosby knew that the change in fiscal year-end date would result in a payroll 

liability for teacher salaries, but did not properly account for it.  Crosby and Merka also knew that 

Crosby’s auditor incorrectly believed that all contractual employees had been paid in full as of 

June 30, 2017.  Merka never corrected this misunderstanding, nor did Merka calculate her own 

payroll liability.  Instead, Crosby recorded only a $30,000 payroll liability related to hourly 

employees.  Merka knew that the payroll liability was understated, but still signed a management 

representation letter falsely asserting that, among other things, the fiscal year 2017 financial 

statements were presented in accordance with GAAP and that the District’s net position and fund 

balance had been properly reported.  

 

Crosby’s January 2018 Bond Documents Contained Material Misstatements and Omissions 

 

13. On January 18, 2018, Crosby issued $20 million of Unlimited Tax School Building 

Bonds to pay its outstanding construction liabilities and to fund new capital projects.  Crosby’s 

false and misleading fiscal year 2017 financial statements were appended to the official statement 

used to market the bonds to investors.  Crosby’s fiscal year 2017 audited financial statements 

understated payroll and construction liabilities by $3.8 million and $7.9 million, respectively.  

These errors resulted in an overstatement of Crosby’s General Fund reserves by $11.7 million.  

Most importantly, Crosby’s fiscal year 2017 financials reported a positive General Fund balance 

when it should have reported a negative one. Crosby’s official statement also disclosed information 

concerning the District’s fiscal year 2017 deficit.  The disclosures in this section of the official 

statement were false and misleading because they did not include the appropriate payroll and 

construction liabilities.   

 

14. As CFO, Merka had ultimate responsibility over Crosby’s fiscal year 2017 financial 

statements.  She was responsible for reporting on financial issues to Crosby’s Board and was 

Crosby’s primary contact during the bond financing process.  Merka and other officers from 

Crosby reviewed Crosby’s official statement prior to its release to prospective investors.  Crosby’s 

then Board President signed Crosby’s official statement used to market the bonds to investors.  

 

15. Crosby knew that its fiscal year 2017 financial statements were false and 

misleading, yet submitted them to the bond financing team for inclusion in the offering documents.  



5 

In fact, Merka did not invite its external auditor to meetings with the bond financing team despite 

Crosby’s municipal advisor making such a request.  Nor did Merka reveal in communications with 

ratings agencies the District’s true financial condition.   

 

Crosby’s Declaration of Financial Exigency, Rating Downgrades, and Restatement 

 

16. During spring 2018, Crosby continued to face cash flow shortages because of the 

additional construction expenses.  In June 2018, Crosby’s new CFO discovered the payroll and 

construction liability errors.  In August 2018, Crosby’s leadership disclosed the financial issues to 

its Board and the public, and began crafting a financial recovery plan with its municipal advisor.  

Beginning in September 2018, ratings agencies downgraded Crosby’s bonds. 

 

17. On October 8, 2018, Crosby declared a financial exigency and implemented a mid-

year reduction in force.  Crosby’s declaration of financial exigency required that a monitor from 

the Texas Education Agency oversee the District’s finances and efforts to achieve financial 

solvency; the monitor is still in place.  In February 2019, Crosby’s auditor issued its audit report 

for Crosby’s fiscal year 2018 financial statements, which included material restatements of the 

fiscal year 2017 ending balances and raised doubts about Crosby’s ability to continue as a going 

concern.    

 

18. Throughout the fall of 2018 and into 2019, the District’s new CFO and 

Superintendent executed on a short and long-term plan to help the District solve its financial 

problems.  These actions included budget cuts, a hiring freeze, reductions in force, examination of 

all expenses, and investigation of the previous conduct. 

 

E.  VIOLATIONS  

 

19. A statement or omission is material if there is a substantial likelihood that a 

reasonable investor would consider it important in making an investment decision.  Basic Inc. v. 

Levinson, 485 U.S. 224, 231-32 (1988). 

 

20. As a result of the conduct described above, Crosby violated Section 10(b) of the 

Exchange Act and Rule 10b-5 thereunder and Section 17(a) of the Securities Act.  Crosby, through 

the January 2018 Bond documents that appended the District’s false and misleading fiscal year 

2017 financial statements, made untrue statements of material fact or misleading omissions in 

connection with the purchase or sale of securities and in the offer or sale of such securities.  Crosby 

further engaged in transactions, practices, and a course of business that operated as a fraud or 

deceit on the investors in the January 2018 Bonds.  Crosby allowed the dissemination of the false 

and misleading financial statements and engaged in other actions that concealed the District’s 

financial distress at the time of the January 2018 bond sale.   

 

F.  CROSBY’S REMEDIAL EFFORTS AND COOPERATION 

 

21. In determining to accept the Offer, the Commission considered remedial acts 

undertaken by Respondent and cooperation afforded the Commission staff. 



6 

 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Crosby’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act that 

Respondent Crosby cease and desist from committing or causing any violations and any future 

violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 

10b-5 thereunder.   

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

Secretary