D.C. Was Cheated, SEC Says

In addition, the complaint says Westbury failed to tell D.C. officials that the general counsel for the charter school fund "was also an SBM board member.

"These two individuals were the very people on whom the District relied for advice and counsel relating to matters like its investments," the complaint says.

In court documents, the financial manager was identified as Timothy Webb and the general counsel as Marialice B. Williams. They were described as independent contractors hired by the city to help manage the charter school funds. Webb, in particular, was responsible for identifying financial institutions to handle the investments, documents show.

Webb and Williams have been partners in several business ventures, according to the businesses' Web sites.

Webb could not be located late yesterday. Williams, reached at her District home, called the allegations "100 percent incorrect with respect to me."

"No one's called me at all," she said. "From the SEC or anywhere else." She referred a reporter to her attorney, who declined to comment.

Staff writer Valerie Strauss and researcher Bobbye Pratt contributed to this report.