TRENTON — The U.S. Securities and Exchange Commission charged the state of New Jersey with securities fraud for failing to tell bond investors it was underfunding its pension funds, the commission said today.
New Jersey and the SEC immediately settled the charges without fines or penalties.
The state failed to include information about benefits, including a 9 percent increase granted in 2001, in information provided to investors who bought $26 billion in bonds, the state attorney general's office said. After the inquiry began in 2007, the state updated its disclosure practices, the attorney general's office said.
New Jersey became the first state ever charged with securities fraud, the SEC said.
"Issuers of municipal bonds must be held accountable when they seek to borrow the public's money using offering documents containing false and misleading information," Elaine Greenberg, chief of the commission's Municipal Securities and Public Pensions Unit said in a statement. "New Jersey hid its financial challenges from the very people who are most concerned about the state's financial health when investing in its future."
"While the state did not admit or deny the SEC's findings in the order, it agreed not to commit or cause any future violations," a statement from the New Jersey attorney general said.
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