The U.S. Securities and Exchange Commission announced Wednesday that it has charged and settled a case against an Edinburg paralegal-turned-registered municipal advisor accused of defrauding a South Texas school district involving multiple municipal bond offerings.
The SEC’s Fort Worth Regional Office claims that Mario Hinojosa and the municipal advisory firm he owned and operated, Barcelona Strategies, misrepresented to La Joya Independent School District officials their professional experience in handling municipal bonds and failed to disclose key conflicts of interests to their client.
“Hinojosa and Barcelona engaged in fraudulent, deceptive, or manipulative acts and breached their fiduciary duties to municipal clients,” the SEC charges.
According to SEC records, Hinojosa simultaneously advised LJISD in his position with Barcelona while he worked as a paralegal at Munoz & Frankel, a South Texas law firm that represented the school district.
Hinojosa is now a paralegal at The Munoz Law Firm, which is lead by Segio Munoz Jr., who is a member of the Texas House of Representatives.
The SEC states that Hinojosa and Barcelona provided LJISD and other agencies with marketing brochure that “created the misleading impression that Hinojosa and Barcelona had served as a municipal advisor on numerous municipal bond issuances and failed to disclose that Hinojosa had a financial interest in the school district’s offerings.”
Hinojosa advised LJISD in three bond offerings between January 2013 and December 2014 and earned $386,876.52 in fees.
Barcelona Strategies, according to the SEC, had the same address as Munoz & Frankel.
“Municipal advisors owe a fiduciary duty to their municipal clients, who rely on advisors to make important financial decisions,” said Shamoil Shipchandler, Director of the SEC’s Fort Worth Regional Office. “Undisclosed conflicts of interest can lead to significant investment losses, and prevent municipal entities from making informed decisions in their selection of municipal advisors. As described in today’s order, Barcelona fell well short of its obligations to this school district client.”
Without admitting or denying the allegations, Barcelona and Hinojosa consented to the SEC’s cease-and-desist order. They will pay $362,606 in disgorgement, $19,514 in prejudgment interest and civil penalties totaling $180,000.
Hinojosa is represented by Toby Galloway, a former senior-level SEC official and now a shareholder at Winstead.
The SEC’s investigation was conducted by Christopher Reynolds and Melvin Warren with assistance by Mark Zehner of the Public Finance Abuse Unit, and supervised by Scott F. Mascianica, David Reece, and Eric Werner.