SEC Accuses New Jersey of Securities Fraud

SEC accuses the State of New Jersey of securities fraud

The U.S. Securities and Exchange Commission (SEC) charged the state of New Jersey Wednesday with securities fraud for failing to disclose the underfunding of pensions to municipal bond investors.

It marked the first time a state was slapped with securities fraud by the U.S. regulatory commission.

The state of New Jersey then agreed to settle the case without denying or admitting the SEC charges, the commission said. New Jersey was instructed to cease and desist from any future violations, but was not required to pay any fines.

The charges involved $26 billion worth of municipal bonds in 79 contracts made between the period of August 2001 to April 2007, the SEC reported.

The documents allegedly “created the false impression that the Teachers' Pension and Annuity Fund (TPAF) and the Public Employees' Retirement System (PERS) were being adequately funded, masking the fact that New Jersey was unable to make contributions to TPAF and PERS without raising taxes, cutting other services or otherwise affecting its budget," according to the SEC.

"The state of New Jersey didn't give its municipal investors a fair shake, withholding and misrepresenting pertinent information about its financial situation," Robert Khuzami, director of the SEC's Division of Enforcement, said in a statement.

The State Treasury and Attorney General’s Office of New Jersey issued a joint statement saying that the state has never missed a bond payment.

"The state aims to have the best financial disclosure in the nation and we will continue to strive to achieve that goal," Andrew Pratt, state treasury spokesman said.

Posted by James Fried on Thursday August 19 2010, 9:16 AM EST. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0