This article originally appeared in the Friday, May 18 issue*
The U.S. Securities and Exchange Commission slapped a paralegal who worked for state Rep. Sergio Muñoz Jr. with a $180,000 civil penalty last week for defrauding the La Joya Independent School District.
Mario Hinojosa, 58, of Mission created a company called Barcelona Strategies LLC, which he promoted with a misleading brochure.
Apparently impressed, the school district hired Barcelona Strategies as the financial adviser for bond issuances during 2013 and 2014. The company collected nearly $387,000.
“Hinojosa was Barcelona’s only employee and had never served as advisor — municipal or otherwise — on any bond issuances,” according to the Securities and Exchange Commission order.
Neither Barcelona Strategies nor Hinojosa admitted any wrongdoing.
Hinojosa created Barcelona Strategies on June 1, 2012, according to records filed with the Texas Secretary of State’s Office.
When he created the company, Hinojosa worked for Muñoz and Frankel, an Edinburg-based law firm, according to the Securities and Exchange Commission order. The firm brought together Muñoz, a politically connected attorney, and Martin Frankel, an attorney licensed in California.
“In June 2012, at Frankel’s suggestion, Hinojosa formed Barcelona,” according to the Securities and Exchange Commission order.
Both the state and federal forms required an address for Barcelona Strategies. Hinojosa listed Muñoz’s law office.
To attract clients, Hinojosa created a brochure touting Barcelona Strategies.
“The brochure was false and misleading in multiple respects,” according to the Securities and Exchange Commission order.
Hinojosa claimed he had four years of municipal finance experience, but he’d never actually served as an adviser on a bond issuance. The brochure also touted experienced “professionals” at Barcelona Strategies, but Hinojosa had no coworkers.
Barcelona Strategies sent the brochure to “various municipalities,” according to the Securities and Exchange Commission order.
The La Joya school district hired Barcelona Strategies in November 2012, just five months after Hinojosa formed the company. Current and former members of the La Joya school board said they didn’t recall meeting Hinojosa and had never heard of Barcelona Strategies.
During the next two years, Barcelona Strategies advised the school district on several bond issuances.
Documents published by the Municipal Securities Rulemaking Board list Barcelona Strategies as a financial adviser on three bond issuances. Muñoz and Frankel served as bond counsel for all three issuances.
Hinojosa never disclosed that he also worked for Muñoz and Frankel, according to the Securities and Exchange Commission order.
“By misrepresenting their municipal finance experience and failing to disclose the conflict of interest with bond counsel, Barcelona and Hinojosa violated the federal securities laws and the rules of the Municipal Securities Rulemaking Board,” according to the Securities and Exchange Commission order.
Neither Muñoz nor Frankel would comment on the Securities and Exchange Commission order, which doesn’t accuse them of any wrongdoing.
“None of that pertains to me,” Muñoz said, adding that the Securities and Exchange Commission action against Hinojosa didn’t involve any work Hinojosa handled for him.
Muñoz also declined to comment on whether or not Hinojosa still worked for him.
The Securities and Exchange Commission ordered Hinojosa
to pay a $20,000 civil penalty. Barcelona Strategies must pay another $160,000.
Along with the civil penalty, Hinojosa and Barcelona Strategies must repay more than $363,000 plus interest, according to the Securities and Exchange Commission order.