The Securities and Exchange Commission, in its first securities-fraud case against a state, accused New Jersey of misleading investors about the health of its two largest state pensions while selling billions of dollars in bonds.
In the New Jersey action, the SEC cited municipal bonds in 79 separate offerings totaling $26 billion from 2001 to 2007. Many of those sales occurred after the SEC said the state abandoned a plan to bring pension funding up to snuff.
The SEC’s filing in the civil case described a series of moves that it alleged misled investors into believing the state was adequately funding the $34 billion Teachers’ Pension and Annuity Fund and the $28 billion Public Employees’ Retirement System.
The funds are the largest of seven funds in the $66.9 billion New Jersey retirement system. Among other things, the SEC said, the state didn’t disclose it had abandoned a five-year plan to fund the pension plans. The pension system covers 689,000 current employees and retirees.
In its settlement, New Jersey neither admitted nor denied wrongdoing but said it wouldn’t do it again. The SEC didn’t fine the state, citing its cooperation and remedial steps it has taken. No individuals were charged.
Jon Corzine was governor of NJ from 2006 to 2010. If he claims he inherited the problem from his predecessor(*), Jim McGreevey, who was governor from 2002 to 2004, one may also consider that Corzine is the NJ governor who has the most experience in the financial area, having worked as chairman and CEO of Goldman Sachs, where he allegedly earned $500 million.
If anyone had the know-how to remedy the bond problems, that was he.
NJ residents thank you, Jon.
(*) A friend’s email reminded me that Codey was Corzine’s immediate predecessor, after McGreevey denied the NJ voters the right to pick anyone (all Democrats, pulling the typical NJ Dem trick – a.k.a. the Torricelli maneuver).
Codey was governor for a year and a couple of months, and his term was totally forgettable.
So sue me.