As reported on CNNMoney.com, by Ben Rooney, August 18, 2010.
The State of New Jersey agreed to settle fraud charges brought by the Securities and Exchange Commission Wednesday after it became the first U.S. state ever to be accused of violating federal securities laws.
The SEC alleged that New Jersey mislead investors in bond sales totaling $26 billion over a six year period ending in April 2007. The state agreed to settle the case without admitting or denying the findings.
The settlement did not involve a financial penalty. But the SEC did impose a “cease-and-desist” order against New Jersey and ordered the state to improve its financial disclosures.
According to the SEC, offering documents connected to a total of 79 bond sales created the false impression that the state could fund certain pension funds. In reality, the regulators said, New Jersey could not make contributions to the pensions without raising taxes or cutting services that could impact its budget.
As a result, investors were not given adequate information to gauge the state’s ability to fund the pensions or assess the impact on its financial condition, 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.
In response, New Jersey said the state has never missed a bond payment and stressed that the state is focused on improving its disclosures.
“We aim to have the best disclosure of any state in the nation, and we intend to meet that goal in our bond offerings,” said Andy Pratt, spokesman for the New Jersey Treasury.
If you or someone you know have concerns about your investments or other securities matter, please contact the Law Offices of Mitchell S. Ostwald at 916.388.5100 or email us at info@molaw.com
