SEC Announces Municipal Securities Fraud Settlement with Illinois Issuer
Section: Washington Update

The U.S. Securities and Exchange Commission has announced a settlement with Juan Rangel, the former president of UNO Charter School Network Inc. and former CEO of United Neighborhood Organization of Chicago, for his role in a misleading $37.5 million bond offering to build three charter schools. The SEC’s complaint alleges that Rangel negligently approved and signed a bond offering statement that omitted the charter schools’ multi-million-dollar contracts with two brothers of UNO’s chief operating officer–conflicted transactions that could have threatened UNO’s ability to repay bond investors. David Glockner, regional director of the SEC’s Chicago Regional Office, stated: “We allege that Juan Rangel signed off on the offering document without even reading it. This kind of negligent behavior is unacceptable in the securities markets.”
According to the SEC’s complaint, UNO entered into grant agreements with the Illinois Department of Commerce and Economic Opportunity (IDCEO) to build three charter schools. Rangel signed the agreements, which required UNO to certify that no conflict of interest existed and to immediately notify IDCEO in writing if any conflicts subsequently arose. However, UNO did breach the agreement when, at Rangel’s direction, it contracted with its COO’s brothers, agreeing to pay approximately $11 million to one brother’s window company and approximately $1.9 million to another brother for services during construction. According to the complaint, UNO did not notify IDCEO about either transaction, and the offering statement disclosed only the $1.9 million contract, not the larger $11 million contract. In addition, the offering document did not disclose that by breaching its agreement, IDCEO could seek to recover the grants, requiring UNO to liquidate its charter schools to repay them, and losing the assets it depended on to repay bond investors.