Securities: SEC Charges Illinois with Fraud

The Securities and Exchange Commission has charged the state of Illinois with securities fraud, obtaining a cease and desist settlement with the state for its failure to accurately portray the status of its pension fund to investors.  This is the second state that the SEC has charged with fraud after having named New Jersey in a 2010 action.

 

The settlement does not require the state to pay any penalties.  Instead, Illinois must make full disclosure of its pension fund's financial situation.  The state has underfinanced its pension fund for years but used gimmicks to make the fund appear to be fully funded.

 

Previously, the fund was a part of the corruption probe of former governor Rod R. Blagojevich.  To cover a shortfall in the funding, the state issued bonds.  The primary underwriter, Bear Stearns, made improper payments to the governor to obtain the work.

 

For a full discussion of the matter, please see the attached article, http://www.nytimes.com/2013/03/12/business/sec-accuses-illinois-of-securities-fraud.html