Judge slams state of Michigan in failed Allen Park movie studio

Judge believes punishments have not gone far enough

Judge Avern Cohn reserved his harshest criticism for the state of Michigan.
Judge Avern Cohn reserved his harshest criticism for the state of Michigan.

ALLEN PARK, Mich. – The U.S. Securities and Exchange Commission (SEC) had settlements with two Allen Park officials who admitted they fraudulently wrote bond documents used to fund the already-sinking movie studio in their city.

However, Judge Avern Cohn characterized the two officials as small-timers. The judge wanted to know why the financial advisers weren't investigate, too. Moreover, Cohn reserved his harshest criticism for the state of Michigan.

Former Allen Park mayor Gary Burtka accepted a $10,000 fine as the so-called "control person." The city's former administrator, Eric Waidelaich, did the heavy-lifting, yet received no fine. They both agreed never to write bond deals again.

Judge Cohn started his case Wednesday by noticing the current Allen Park administration's absence in his courtroom. He called it a "strange disinterest."

"They were the victim and they are not here today. I find that interesting," he said.

The $30 million fraud came when the bond deal failed to disclose that the movie studio deal was falling apart before the bonds were ever floated. The SEC said Allen Park's financial advisors acted on Waidelaich's bad information, and at the time federal law didn't make them ultimately responsible.

The judge remained frustrated that there are no more known investigations into the fraudulent deal. He slammed the state of Michigan for using an emergency manager to revive Allen Park after what he called "the debacle."

"The state of Michigan lacks a mechanism to review the legitimacy of municipal borrowing before debt instruments are issued. It is therefore fair to say that the state steps in only after the barn door is closed and the horse escapes. Who will guard the guards themselves?" said Cohn.

Still, as clearly as the judge sees this case -- a bad bond deal that cries out for prosecution -- the state does not. The treasurer's office told Local 4 on Wednesday that at the time Allen Park had a so-called "qualified status" and didn't need state review or permission to float a bond deal.

In the end, that's the judge's point. The door has been left open for the legislature to take a look at this issue.

Allen Park's current administration told Local 4 that they were told they didn't need to be in court on Wednesday.

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