Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

SEC sues New Jersey for fraud

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- 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 misled investors in municipal 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 pension funds covering teachers and state workers. In reality, the SEC said, New Jersey could not make contributions to the pensions without raising taxes or cutting services that could impact its budget.

As such, 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 it cooperated with the federal investigation.

"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. To top of page

Index Last Change % Change
Dow 16,374.76 23.38 0.14%
Nasdaq 4,733.50 -16.48 -0.35%
S&P 500 1,951.13 2.27 0.12%
Treasuries 2.17 -0.02 -1.14%
Data as of 5:17am ET
Company Price Change % Change
Bank of America Corp... 15.94 0.09 0.57%
Apple Inc 110.37 -1.97 -1.75%
Freeport-McMoRan Inc... 10.13 0.23 2.32%
Intel Corp 29.08 0.48 1.68%
Frontier Communicati... 5.52 0.31 5.95%
Data as of Sep 3
Sponsors

Sections

Americans are transforming how they eat -- paying more attention to the origins of their food and how it's made. And Kimbal Musk is at the forefront of a movement that is accelerating the rate of change. More

The Labor Department releases its August jobs report on Friday, and it will have big implications for the Federal Reserve. More

The BauBax travel jacket, with 15 built-in features, needed $20,000 on Kickstarter, but got $9 million. More

Pimco's famous fund once managed by star manager Bill Gross has less than $100 billion in management for the first time since 2007. More