The red flags were flying all around Randy Miller. He’d already had bouts with bankruptcy. He’d been accused—not once, but three times—of defrauding business associates. He pointed to a partnership with international soccer powerhouse Manchester United, even though the other ties to professional teams he cited were over three decades old. 

But when the 68-year-old businessman and his son turned to Wall Street in 2020 and 2021 for money to build a sprawling youth-sports complex in the Sonoran Desert outside of Phoenix—after repeatedly failing to drum up enough financing on his own—it not only obliged, but lent him $280 million to do so.

All it took was an eight-page application to the Arizona Industrial Development Authority, which had never turned down any of the scores of borrowers that sought the state’s imprimatur on their bond sales, an audit late last year showed. Dangling yields near 8% back when the Federal Reserve was pinning rates near zero, the debt was snapped up by big institutional money managers like the Vanguard Group Inc. and AllianceBernstein Holding LP.

Quickly, it all went south.

Organizations that Miller said were lined up to use Legacy Park never showed. At least seven, including Manchester United, told Bloomberg News they never signed the “pre-contracts” or “letters of intent” cited in the bond prospectus. Three said letters bearing their names were fake. Bondholders, meanwhile, who competed aggressively for high-yielding debt when money was easy and interest rates were low, now stand to be virtually wiped out.

In less than three years, the former minor-league baseball player’s dream project has morphed into what is now the third-largest default in the municipal bond market since the pandemic.

Miller and his son didn’t respond to emails and phone calls from Bloomberg seeking comment. Neither has been accused of any wrongdoing by law enforcement.

Bad Timing
To be clear, they had their share of bad luck and bad timing, launching the project just as the pandemic upended the sports industry and the economy. Nevertheless, its collapse also exposed something that’s long been an open secret on Wall Street: Each year, billions of dollars in high-risk projects are financed with little vetting or government oversight—all because they piggyback on the names of state and local municipalities.

“This is going to be the poster child for what’s wrong” with these types of government-sponsored arrangements, said Stephen Griffin, a consultant for Saybrook Fund Advisors, which set up a vehicle that filed suit against Miller and other parties to the bond sale after the default.

Freed from the regulations that apply to sales of corporate stocks and bonds, such debt is sold by a constellation of agencies across the U.S. that do little if anything but rent out access to the municipal market. Some of the deals are arranged for local colleges, hospitals and other well-established businesses. But they’ve also been used to finance new nursing homes, charter-school startups and for profit-businesses like the American Dream shopping mall in New Jersey’s Meadowlands, creating a risky corner in one of the bond market’s safest havens.

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