NJ Settles Municipal Bond Offering Fraud Charges with SEC

The state of New Jersey has settled Securities and Exchange Commission charges involving the alleged fraudulent marketing of municipal bonds. This is the first time that the SEC has filed charges against a US state for allegedly violating federal securities law.

The charges, brought by the SEC’s Municipal Securities and Public Pensions Unit, involved $26 billion in approximately 79 bond offerings that were offered between August 2001 and April 2007. The SEC accused New Jersey of concealing from bond investors the fact that the state didn’t have the money to fulfill its obligations under two of its largest pension plans for state employees and teachers. New Jersey also allegedly using accounting tricks to avoid increasing taxes to fund a 2001 benefits increase for both plans and hid this information from investors. As a result, the SEC contends that losses totaling approximately $2.4 billion were covered up.

The SEC says that New Jersey did not have written procedures on how to review bond documents and failed to train employees about its disclosure obligations. A training program regarding disclosures is now in place.

By agreeing to settle, New Jersey is not admitting to or denying the charges. It has, however, agreed to cease and desist from future violations. The SEC did not order a monetary fine or penalty as part of the settlement.

SEC Charges State of New Jersey for Fraudulent Municipal Bond Offerings, SEC.gov, AUgust 18, 2010

Misconduct related to the management of securities can result in financial losses for investors. Our securities fraud law firm represents individual and institutional investors with investment fraud claims. You may be able to recoup your losses.