Yesterday the Securities and Exchange Commission (SEC) charged the State of Illinois with securities fraud for misleading municipal bond investors about the state’s approach to funding its pension obligations.
The SEC released this statement:
An SEC investigation revealed that Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. Illinois failed to disclose that its statutory plan significantly underfunded the state’s pension obligations and increased the risk to its overall financial condition. The state also misled investors about the effect of changes to its statutory plan.
Illinois, which implemented a number of remedial actions and issued corrective disclosures beginning in 2009, agreed to settle the SEC’s charges.
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“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. “Time 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.”
But the St. Louis Post-Dispatch buried the story on page 8:
And, from the title of the article you’d never know Illinois hid its pension troubles from investors.
And you wonder why the Post-Dispatch is criticized as a biased media outlet?