The former CEO of the Tri-Valley Learning Corporation (TVLC), which operated two public charter schools in Livermore, has agreed to pay a $20,000 fine following charges he misled investors who bought nearly $26 million in bonds to fund the purchase of a building to house his education enterprise, authorities said last week.

A complaint filed in U.S. District Court in San Francisco charged William Alfred Batchelor and his former finance director John Michael Zukoski with violating an antifraud provision of the Securities Act of 1933. According to prosecutors with the Securities and Exchange Commission, a settlement agreement in court — expected to take place Wednesday, May 6, as of press time — was set to impose a fine on each man and prohibit them from participating in any future municipal debt offerings. Zukoski’s penalty was set at $15,000.

Their settlement with prosecutors included no admission that they did anything wrong. But according to prosecutors, Batchelor, 45, of Danville, and Zukoski, 44, of Pleasanton, failed to disclose to investors in a bond offering five years ago that TVLC had "serious cash flow problems” that affected its ability to make debt service payments on the bonds and was already behind on payments owed to vendors.

The complaint also alleged TVLC was a year overdue in paying an additional private term loan and had drawn a bank line of credit to its limit just before the bond sale.

“Municipal bond investors depend on issuers providing full and accurate information about the issuer’s ability to repay the bonds,” said LeeAnn Gaunt, chief of the U.S. Securities and Exchange Commission’s Enforcement Division’s Public Finance Abuse Unit. “In this case, we allege the defendants misled investors about Tri-Valley’s dire financial condition.”

Batchelor’s attorneys — Thomas P. Mazzucco, Aaron McClellan and Nicholas Larson — did not respond to a request for comment. Neither did John Zukoski’s attorney, Steven Gruel.

The case against Batchelor and Zukoski stemmed from May 2015, when TVLC operated the K-8 Livermore Valley Charter School and secondary Livermore Valley Charter Preparatory. TVLC decided to buy an adjacent building to reconfigure as classroom space, because the Livermore campuses were at capacity with waiting lists of students hoping to enroll, the complaint said.

Without enough funds to buy the property, Batchelor and his board of directors decided a bond sale was necessary.

At the time, prosecutors said in the complaint, Batchelor also was CEO of California Preparatory Academy, which operated a private high school called San Francisco Bay Preparatory Academy. He had already borrowed $27.5 million in a 2012 bond issue and could not take on more debt, so he and an underwriter formed an entity called Independence Support LLC to be the borrower for the 2015 bond issue.

After the Alameda County Board of Supervisors approved the municipal bond issue, the secondary school and Cal Prep shared a building on Independence Drive in Livermore.

But according to prosecutors, Batchelor and Zukoski never told anyone that TVLC owed vendors hundreds of thousands of dollars in delinquent debts and had transferred millions of dollars from one of Batchelor’s nonprofit companies to make its payroll and pay other expenses.

A table in their Limited Offering Memorandum included financial projections for fiscal years 2015 through 2018 that was “materially inaccurate,” prosecutors said.

After the bonds were sold, TVLC was unable to make any of the lease payments for debt service because of its financial problems, the complaint said. Payments, instead, were made by Cal Prep from funds Batchelor had raised from foreign sources, the complaint stated.

“Tri-Valley’s condition continued to deteriorate, which, combined with declining enrollment, ultimately led to it filing bankruptcy proceedings in November 2016,” the complaint said. “The bonds subsequently defaulted in 2017.”

At the time of the bankruptcy filing, TVLC’s board replaced Batchelor and asked Zukoski to resign. The new CEO, Lynn Lysko, asked Alameda County Superintendent of Schools Karen Monroe to conduct an audit.

The audit found TVLC management “may have” failed to disclose numerous conflict-of-interest relationships and diverted and commingled funds with various private entities, including three created by Batchelor.

The schools closed in 2017.