Securities Law

Illinois is now the second state to face SEC accusations of securities fraud

The Securities and Exchange Commission has accused Illinois of misleading investors about the financial health of public employees’ pension plans.

According to the SEC, the alleged problems occurred mostly during the administration of disgraced former Gov. Rod Blagojevich, now serving a 14-year prison sentence in a federal corruption case. The state is the second to face civil accusations of securities fraud case by the SEC, report the Wall Street Journal (sub. req.), the Chicago Sun-Times, the New York Times and the Chicago Tribune. New Jersey was accused in 2010.

The SEC action against Illinois focuses on disclosures from 2005 to 2009. “In particular,” the Sun-Times says, “the agency hit the state for misleading investors about the impact in 2006 and 2007 of ‘pension holidays’—a happy-sounding budgetary misnomer used at the time to describe deeply diminished pension payments—on the state retirement systems’ overall health.”

Illinois agreed to a cease-and-desist order, but the state did not admit wrongdoing and will not pay any fines or penalties.

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