Last of four partsRetired Florida optometrist Bernard Miskiv thought he had a good opportunity when he bought bonds issued by the Tarrant County Cultural Education Facilities Finance Corp.The bonds carried an 8 percent coupon -- an attractive return these days. Miskiv thought the deal was a no-brainer even though the bonds for Westchester Plaza, an assisted-living center in the heart of Fort Worth, were unrated. But when he didn't get a payment on his investment in a year, he began asking questions.He found that a $200,000 reserve fund, which was supposed to be set up to pay investors in case of default, was missing.Miskiv said he has contacted members of Congress and the Houston office of the U.S. comptroller of the currency to report the missing fund. "I've heard nothing back so far," he said. "I just want to know -- where the hell's the money?"He'll probably never know.It's the opaque nature of the municipal bond business. The federal government may soon make it more transparent, though.Some in Congress are concerned that conduit issues can flood the bond market and tarnish other unrelated municipal bond issues, undermining investor confidence and making it costlier to borrow. That was a concern of some residents in Southlake, as a developer sought the city's OK for a deal that was to involve conduit bonds.The Securities and Exchange Commission, alarmed by record numbers of municipal bond defaults in the past few years, has conduit bonds in its sights, and the Government Accountability Office is studying whether more disclosures of all municipal bonds are needed.SEC Commissioner Elisse B. Walter is zeroing in on disclosures for conduit bonds, holding field hearings. One will be in Austin next year. "We've long had the same kind of concern, and the commission in the past has recommended treating conduit bonds like corporate bonds ... on the theory that that's what they are," Walter said.The agency could recommend that investors be given access to more timely financial statements that would have to be audited by generally accepted standards. Disclosure documents for conduit offerings would have to be filed with the SEC before bonds are sold, as they are with corporate securities."The opportunity for investor confusion about conduit deals is great," Walter said.Underwriter concernsThe $4 million in unsecured debt issued in 2008 on the Westchester project was sold to some investors like Miskiv as part of a package of unrated, tax-exempt bonds.And some people with relatives who needed nursing care invested in the $43 million of Tarrant County Health Facilities Development Corp. bonds issued a decade earlier for Westchester and related Harvest Communities projects in South Texas.Some critics noted that Westchester's underwriter on the $4 million in unrated bonds, J.P. Turner & Associates of Atlanta, has been fined hundreds of thousands of dollars for securities violations, including accusations of selling fictitious securities, hiring unqualified employees, breaching fiduciary duty, committing fraud and misleading investors.Miskiv has been in contact with Turner to try to find out what happened to the reserve fund. Ray DeRobbio, an official with Turner, acknowledged that he was trying to help Miskiv address the issue. He said he could not comment about Turner's previous compliance issues.The underwriter for the Harvest bonds was the now-defunct Schneider Securities, based in Denver. It had also been disciplined for severe securities violations, including misrepresentation of material facts and supervisory failures.The underwriter is supposed to do "due diligence" on the deal -- investigate the potential investment to confirm the material facts. But some cut corners on feasibility studies and other financial evaluations, said Richard Lehmann, who publishes the Distressed Debt Securities Newsletter. The underwriter also buys the bonds for resale to investors.SEC Chairwoman Mary Schapiro has said she would like to prohibit those who resell bonds to investors from acting as financial advisers in the same bond deal. The concern is that the seller who stands to profit from the deal is also responsible for feasibility studies that determine whether it is financially sound.Disclosure of riskRegulators say financial advisers are supposed to make investors aware of the risks, but that isn't assured. For starters, many investors aren't aware that counties, like Tarrant, do volumes of business in junk conduit bonds through their public corporations, as well as in credit-rated bonds that may have undergone more scrutiny.Confusion is rampant even if the fine print is clear on voluminous bond documents or if a financial adviser explains the risk.When disclosure is inadequate, "the chances of someone dropping the ball skyrockets," said Ernesto Lanza, general counsel of the Municipal Securities Rulemaking Board, the federal regulator that oversees the municipal bond market.Because the securities aren't regulated, investors don't always have access to disclosures such as rating changes, financial and cash flow statements, and any pending lawsuit that could jeopardize a project.The government name on the bond also may confuse investors, Lanza said. "You see that public entity attached to it, so it is easy for someone to think the county is going to step up to the plate, and there lies the problem," he said.Walter says the SEC will harp on clarity in disclosures. That means that statements on offerings, up to several hundred pages, would state in clear print and in a conspicuous location the risks to investors. The SEC would also require that investors be given detailed financial information about the borrower.Conflicts of interest are also a concern with other municipal advisers, Walter has said. As another step toward improved oversight, the commission has required that municipal advisers register with the agency.A "municipal adviser" can include a law firm that provides any type of bond market advice to clients, Lanza said. At the same time, a law firm that provides legal advice isn't necessarily a "municipal adviser," he said.That is one definition that regulators will have to crystallize, he said.C. Harold Brown of Brown, Pruitt, Peterson & Wambsganss, issuer's counsel for two of Tarrant County's public corporations, says he's not a "municipal adviser."Minimal oversightAs defaults keep climbing, some congressional leaders have tossed up drastic measures: removing the tax exemption of conduit bonds altogether. Still others talk about limiting the use of the bonds to safer projects.Other proposals would give issuers a greater share of the oversight burden.Current rules require minimal or no oversight by issuers and insulate them from liability.Investors have tried to hold issuers responsible. In one of the nation's biggest conduit bond default cases, Tarrant County Health Facilities Development Corp. was among those sued.The case involved more than $40 million in bonds issued by the corporation for hospitals in Fort Worth, Brownsville and Houston. They included bonds for St. Joseph Gardens, a 176-bed Alzheimer's treatment hospital in Fort Worth. Other authorities issued tens of millions more in bonds for facilities in other states.The Tarrant bonds defaulted within two years. The SEC said the deals were a Ponzi scheme that defrauded investors -- many of them families of Alzheimer's patients -- but settled the case for pennies on the dollar.Separately, a class-action lawsuit tried to recover money from Tarrant and other issuers. Claims were that the issuers knew that underwriters were not performing the required due diligence.As Tarrant's issuer's counsel, Brown's firm footed the bill for the case, he said. Tarrant was eventually dropped from the suit.Municipalities don't want the extra burden of greater disclosure, but the SEC will most likely vote in favor of it, said Dan Bergstresser, associate professor of business administration at Harvard Business School."There are some legitimate reasons potentially for subjecting municipal issuers to a lower disclosure standard than corporate issuers," he said.On the other hand, the writing's on the wall, he said."I suspect that, without wanting to prejudge what the GAO studies are going to find out on that, at least directionally where we need to go is more disclosure," he said. "The transparency has been astonishingly low."