WASHINGTON - The Securities and Exchange Commission told Denver on Friday that it is shutting down its two-year investigation of the city's Denver International Airport financings without filing any securities fraud charges against the city.
Daniel F. Shea, the director of the SEC's central regional office in Denver, sent Denver officials and their attorneys, a closing letter announcing the investigation has been "terminated."
The SEC sent similar letters to the eight securities and engineering firms that it had been investigating as well as the city, Denver officials said.
SEC officials would not comment on the letter.
But Daniel Muse, Denver's city attorney, said that he felt vindicated by the SEC letter. "Obviously, they didn't have any substantial evidence of wrongdoing or securities fraud violations," he said.
"My primary reaction," Muse said, "is that I'm glad the city can stop spending money on what, in our judgment, was not a well-founded investigation to begin with. If they had followed the law, they probably would have ended this investigation a long time ago."
Muse said the city has spent $2 million defending itself against allegations that surfaced from the SEC investigation.
He added that the SEC's failure to file charges will make it much harder for bondholders to prevail in a pending class action suit that was filed in a federal court over the same issues.
The SEC letters put an end to a two-year pitched battle between the city and the nation's largest securities regulator over whether the disclosures in documents for $2 billion of airport bonds sold in the early 1990s adequately disclosed problems with the airport's baggage handling system that led to cost increases and delays.
The $4.8 billion airport opened on Feb. 28, 1995, after a delay of about 16 months and cost increases of about $700 million.
The case was also a lightning rod for criticism within the municipal market about the SEC's enforcement program, having sparked the Public Securities Association to write SEC chairman Arthur Levitt earlier this year to complain that the SEC regional staff appeared to be setting new standards and overstepping the commission's authority in the investigation.
The SEC regional staff, according to city officials who had talked with the staff, contended that the documents for five bond issues sold in 1991 and 1992 contained false or misleading information about the baggage system and the opening date of the airport.
Denver rejected those claims, insisting that all of the information it disclosed was accurate and that the Denver airport was like any other big project in experiencing delays and cost overruns.
At times the city's feud with the SEC became bitter. Denver charged that Levitt had prejudiced the case by commenting disparagingly on the city's disclosures at a bond lawyers meeting in Washington before the staff investigation was completed. Denver officials also took pot shots at political contributions Levitt made to Bill Clinton's first presidential election after the SEC began looking at whether dealers had engaged in any pay-to-play practices in the airport financings.
The SEC regional staff sent Wells notices to the city and the eight firms last year informing them that it was poised to recommend that the commission file securities fraud charges against them.
Denver in turn sent a Wells submission to the SEC claiming that Congress never intended for the federal securities fraud laws to apply to state and local issuers. The city's stance surprised market participants and riled SEC officials who have insisted that the securities laws' antifraud provisions permit the commission to go after anyone who makes false or misleading material statements to investors.
