SEC Says Illinois Hid Pension Troubles
From the Wall Street Journal
For years, Illinois officials misled investors and shortchanged the state pension system, leaving future generations of taxpayers to foot the bill, U.S. securities regulators allege.
The Securities and Exchange Commission on Monday charged Illinois with securities fraud, marking only the second time the agency has filed civil-fraud charges against a state.
But the agency and the state also announced that a settlement had already been reached in which Illinois won't pay a penalty or admit wrongdoing.
The action was part of a broader push by the SEC to bring greater transparency and accountability to the municipal-bond market, as the agency alleged the state failed to adequately disclose to investors the risks of its underfunded pensions systems.
The action also shows in detail how political decisions left the state with only 40 cents for every dollar of pension liabilities—a financial hole Illinois officials are now scrambling to fill.
Yet no matter how harmful the pension practices were to the state's finances, SEC officials say they could only pursue charges against Illinois for what it failed to tell bond investors.
Most states comply with governmental accounting standards, which "Illinois did not follow," Elaine Greenberg, head of the SEC's municipal securities and public pensions unit, said in an interview. "But the SEC cannot order a state to follow any particularly methodology."
Read more in our daily News Update...
From the Wall Street Journal
For years, Illinois officials misled investors and shortchanged the state pension system, leaving future generations of taxpayers to foot the bill, U.S. securities regulators allege.
The Securities and Exchange Commission on Monday charged Illinois with securities fraud, marking only the second time the agency has filed civil-fraud charges against a state.
But the agency and the state also announced that a settlement had already been reached in which Illinois won't pay a penalty or admit wrongdoing.
The action was part of a broader push by the SEC to bring greater transparency and accountability to the municipal-bond market, as the agency alleged the state failed to adequately disclose to investors the risks of its underfunded pensions systems.
The action also shows in detail how political decisions left the state with only 40 cents for every dollar of pension liabilities—a financial hole Illinois officials are now scrambling to fill.
Yet no matter how harmful the pension practices were to the state's finances, SEC officials say they could only pursue charges against Illinois for what it failed to tell bond investors.
Most states comply with governmental accounting standards, which "Illinois did not follow," Elaine Greenberg, head of the SEC's municipal securities and public pensions unit, said in an interview. "But the SEC cannot order a state to follow any particularly methodology."
Read more in our daily News Update...