Illinois and the Securities and Exchange Commission (SEC) settled a federal civil securities fraud case surrounding the state's underfunded pension system Monday.
In 2010, the
SEC announced plans to look into the state's pension disclosures and filed three charges against Illinois in connection with public pension disclosure
failures, alleging Illinois broke federal security laws by failing to
keep investors abreast of problems with the state’s pension funding
schedule between 2005 and 2009.
By failing to divulge Illinois’
underfunded state pension obligations, largely during impeached former
Gov. Rod Blagojevich’s administration, the SEC said Illinois intensified
the risk to its financial condition.
Illinois offered and sold more than $2.2 billion worth of municipal bonds during that period.
"The State of Illinois and the U.S. Securities and Exchange Commission entered into a settlement order Monday ending an inquiry into pension disclosures in bond offerings made by the State between 2005 and early 2009," explains a statement from Gov. Pat Quinn's office of management and budge. "The order acknowledged the proactive steps taken by the State to enhance its pension disclosures and related processes since 2009. The State began these enhancements prior to being contacted by the SEC. The State believed it to be in its best interests to enter into a settlement with the SEC."
settlement doesn’t make the state responsible for any fines or
penalties, but instead informs and cautions potential investors of the case against
"Municipal investors are no less entitled to truthful
risk disclosures than other investors," said George S. Canellos, acting director of the SEC's Division of Enforcement, in a statement.
after time, Illinois failed to inform its bond investors about the risk
to its financial condition posed by the structural underfunding of its
pension system," Canellos said.
During his budget address last week, Gov. Pat Quinn pressured
lawmakers to draft a bill that would address Illinois’ unfunded pension
liability of $96.8 billion that threatens to consume funding for
education and other public services, and slapped the state with the worst credit rating in the nation.