SPRINGFIELD-Illinois broke federal securities laws and "misled investors" in misstating the true health of the state's depleted pension funds between 2005 and early 2009, the Securities and Exchange Commission announced Monday.
The finding of securities fraud doesn't subject Illinois to any fines or penalties, but it amounts to another fiscal black eye for a state burdened by the worst bond rating in the country and completely underwater by inaction in solving its $96 billion pension crisis.
The SEC finding, the second such action against a state, focuses mostly on misstatements linked to $2.2 billion worth of bond offerings issued during impeached ex-Gov. Rod Blagojevich's administration. New Jersey was cited in 2010 for similar disclosure failures regarding pension underfunding in its bond offerings.
"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 prepared statement.
"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," Canellos said.
In particular, 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.
The Blagojevich administration also neglected to outline for investors how a 1995 pension-funding law created "systemic underfunding (that) imposed significant stress on the pension systems and the state's ability to meet its competing obligations." Between 1996 and 2010, the state's five pension systems took on $57 billion worth of red ink.
A spokesman for Quinn's budget office, which began including information about the state's perilous pension situation in bond documents in April 2009, said Illinois has "cooperated fully" with the SEC during its inquiry and concluded it was in the state's "best interests" to settle the matter.
"The state neither admits nor denies the findings in the order, which carries no fines or penalties," said Abdon Pallasch, assistant budget director.
The SEC report faulted Blagojevich's budget office, led during his first term by John Filan and by Ginger Ostro in Blagojevich's second term, for a series of "institutional failures."
Within that office, "the team responsible for managing the disclosure process purported to rely on its consultants, underwriters, underwriter's counsel and bond counsel to identify and evaluate the need for additional disclosures. Those parties, however, relied on the state to do the same," the report said. "The result was a process in which no one person fully accepted responsibility for identifying and analyzing potential pension disclosures."
The SEC launched its investigation after Senate Republicans in 2005 called for a federal probe into why Blagojevich's budget office, in a prospectus for a $300 million bond issue, overstated savings from a set of pension reforms enacted under Blagojevich.
In an October 2005 interview with the Bloomington Pantagraph, Becky Carroll, the spokeswoman for Blagojevich's budget office, stood by its disclosure standards and belittled the concerns as "just another desperate attempt by the Senate Republicans to twist and turn facts and rewrite the very poor fiscal history in Illinois that they created."
On Monday, Senate Minority Leader Christine Radogno (R-Lemont) aimed to set the record straight.
"I am proud to note that the Illinois Senate Republican caucus was the first to sound the alarm in 2005 and call for the SEC investigation," Radogno said. "Our work to expose these deceptive practices led to corrective action and improved disclosure."
No worries Mate. The Feds will bail out bankrupt states like Illinois and California by buying their muni bonds regardless of the risk.
I am a former Chicago still living in IL. One word:
SHAMEFUL
Yet,
WE ALL SHOULD HAVE SEEN THIS COMING.
Am a lifelong Democrat; now convinced we are in dire need of a downstate Republican governor. Perhaps someone from Carbondale? Please stand up and help us out of this self-made mess.
Just as important, Mike Madigan ought to "retire" while he still can; I hold him personally liable for this obscene state of IL governmental cluster-ups. AS THE IRISH SAY- GET THE FOOK OUT!
The SEC?
You mean the same people who were asleep at the wheel during the Bush Administration?
Talk about fraud.
What else should we expect from the Democrat Crime Syndicate?
It's run by Democrats - you were expecting the TRUTH? Lies & deception is what Illinois politics are all about. As the politicians know - it's not their money - they just get paid with other peoples money. What do they care.
Not surprised at all. The state of Illinois has such a corrupt government. They are probably hiding information about other stuff.
If Obama had a son...
Why no JAIL TIME? That is what I would get in an equally competitive situation.
That's NOT FAIR.
We have to remember we are dealing with MORONS who are running our state.
Shocking. IL is crooked. I'm surprised that the Administration didn't quash this while they had the chance.
To itsme_terrylee@yahoo.com
Its time for these politicians to be accountable to the tax payer, we are not going to disarm, period. We want the politicians to start telling the truth..why are we spending millions on tanks and assault weapons and bullets for homeland security? We know its not for the Mexican boarder..so what is it all for? Its against the law to make a army to be used against the American people..Are the Obama homeland security planning a coup against the American people when the stock market falls, the banks fail, the 401ks and IRAs are taken, and the government cannot pay its bills and no social security checks or food stamps are no longer paid, when China says we want Japan..and Taiwan and California for your debt..Russian moves in on Alaska...tell us why homeland security is building a Obama army?
"which carries no fines or penalties"...
Do you think a private company would get away with this???
Typical Chicago style politics. It is too bad the people of Illinois have to put up with these corrupt Chicago pols and Mafia-style Democratic Party that dominates the state for the welath enhancment of themselves and their cronies. When will the rest of the state expel Chicago from the state and start to demand honesty and service to all ciitizens, not just the politically connected? I would like to have the tar, feather, and rope concession in Springfield when that day comes. ;-)
"The finding of securities fraud doesn't subject the state to any fines or penalties but amounts to a warning to potential investors about the state's past financial misdeeds."
Move along, nothing to see here, invest as usual.
Does the SEC imply there are still people stupid enough to be potential investors in Illinois?
I think if the SEC really did some digging, they'd fine a lot more states than Illinois who have done the exact same thing. In fact, I think people would be shocked at just how many have.
I'd start with CA.
here come a slap on the wrist.
Question: Why does this NOT surprise anyone ? Answer It is Ill.
This is an absolute joke. Because it is a government entity they will get off without criminal proceedings as they defrauded the public. The OWS crowd should be screaming for their heads as much as they are about the bankers.........ohhhhhh, I forgot.............nothing to see here since they're good progressives just trying to rob the taxpayers who don't deserve their money..................
What a surprise. Illinois behaves like a teenager with a credit card, and the federal government responds to it like an irresponsible parent.
Ah, Chicago. Glad I moved out of that crapper decades ago!
Does this ruling preclude civil suits against Illinois by deceived investors?
WOW!
You'd think the Feds have some mighty big brass cojones. You'd think the SEC would do the same to the FED and the Treasury for lying about the state of the depleting currency and shortfalls that have already indebted the next two generations.
You would need to be a crackhead to buy these bonds. I put them between Greece and Italy.
Why do people continue to tolerate politicians who cater to the smooth handed, spoon fed, lazy, so called wealthy (nothing to back their paper but loans). These elite only hide from useful work to live in fake world requiring good honest people to shine their shoes. Stand up and flush these deadbeats out and hold your head high. Let them know to step up or eat bark.
Sure seems to me like the person(s) who intentionally set out to defraud investors in the name of the state should be facing criminal charges -- otherwise there is no incentive other than your state's general reputation (something politicians have shown they are willing to compromise when it leads to their personal gain) not to do such a thing.
On the surface, this looks like government oversight and enforcement in action, but don't expect many, if any, heads to roll, because this article also provides the perfect trap-door of unaccountability... former Governor Blagojevich. With the former Governor already disgraced and in jail, this provides a perfect opportunity for Illinois politicians to air their dirty laundry and, at the same time, wash their hands of scandal, by turning Blago into a convenient whipping boy for any and all corruption that is known or is yet to be discovered. If the wildly successful "Bush did it" strategy in Washington is any indicator, the "Blago did it" defense could be used for years, if not decades to come. "Blago did it" is the perfect alibi.
Does this realyy surprise anyone that the government in Illinois would willfully mislead the public, in this case muniole boind holders investing in the Illinois Pension funds. the state is probably more currput than th elong regime in Lousiana many years ago. The Illinois state government is a product of the Illinois Democrat Party and it's power at any cost, thug ways. The real scary thing is that many of these Chicago Dmeocrat party people are now looking out for Social Security, whichalready has about a $60 trillion dollar unfunded mandate; they will at least doubl ethat before someone gets them out of Washington. But, Illinois you got what you voted for !!!!!!!!!
Fess up Illinois.
Your libtard policies and communist public unions have bankrupted the state; at some point, you;ll have to admit you've caused your state to FAIL.
There should not be an IOTA of surprise. After all the SEC is dealing with the most corrupt state in America. The disgust and embarrassment that the Illinois government causes to it's citizens, year after year ( at almost all levels of government) is appalling. I think the Illinois government leadership is so blinded by their perceived power that they will NEVER correct the problems, until they are forced into bankruptcy.
Fraud in Illinois? No way! I don't believe it...you suckers deserve who you vote for. At some point your lust for our cash hits critical mass. And that point has been passed.
Nothing new here. I think the whole state of Illinois is corrupt, except
for the innocent folk who live there.
This is another reason that no one with a brain is surprised that the barry hussein regime is so incompetent and corrupt. Anything bred in Chicago is in a political sewer that breeds extortionists and criminals.
Gosh. I wonder what political party Blagojevich and Quinn belong to? It is a mystery. I guess we'll never know. *cough*democrats*cough*
Of course they're lying. And the Sun Times has been facilitating Crook County lies for years.
No problem underfunding the pension fund. No problem that 1/5 of the total state budget goes, not for salaries and benefits, but for pensions. No problem that the fund is about $100 million and Cook County is $28 also million underfunded. Just that the state didn't inform bondholders, which carries no fines or penalties.
Illinois' unfunded pension obligations are being misstated? Advice to the SEC - Illinois is penuts compared to the over 1/2 trillion in California or the nearly 80 trillion in unfunded obligations across the US. The 15 trillion national debt excludes underfunded obligations such as Social Security. Medicare, along with federal, state and municipal pension funds. The individual fund managers use phoney anticipated rates of returns so that they appear OK. That way they can justify raising benefits for themselves. Blagojevich was just going with the flow.
This just in:
Illinois politicians are dishonest.
Film at eleven.
Why does the population of Illinois continually elect criminals at all levels of state government ?
This should answer any questions about pension problems
this should answer any questions on pension problems http://www.pensiontsunami.com/index.php
Government can commit securities fraud with our money and not even get a slap on the wrist. I hope every single investor sells their Illinois municipal bonds. Let them squirm on how they will pay their bills then. See.....this is Liberal Government for you....keep voting them in!
State officials everywhere are just laughing at the toothless SEC
shocking
People deserve all the bad government they elect.
I am just shocked, someone in state government lying. I just can't believe this. Listen folks, this is just the start of IL problems, you can't spend or give away what you don't have for very long.
Why aren't the fund managers who made these disclosures (or the elected representatives) held accountable just as private actors would be?
There should be consequences for everyone and anyone who lies and defrauds someone else (in this case the public). This is tantamount to having different classes of people...those who are governed by law and those who are not (government officials and bureaucrats).
I'm shocked political and financial corruption in Illinois! Aren't their last two governors in jail and one of their Congressmen was just sent to jail for the same.
Go figure....corruption in Illinois politics.....just like the kind in DC with it's 'Illinois' connection.
Keep up the really good work in Illinois because all the people and jobs are coming to Wisconsin as result of all the FIB failures.
Blagojevich, you dirty Son-of-a-B---h!! Septic-tank scum like YOU are why all REAL Americans now put our 2nd Amendment FIRST!!
But if it was one of us doing that? There would be some serious jail time. Since its the govt then its okeedokee.
"The finding of securities fraud doesn't subject Illinois to any fines or penalties..."
Wow. The bankers and investment fund managers who are looking at possible arrest and prison time (as unlikely as that it) should have gone into government "service." Committing fraud with no fear of arrest is a helluva perk.
Democrats never lie.
Could anyone please cite the Illinois State Pension Fund assumed rate of return and any changes made to the assumption in the last 10 years?
I'm not from IL, but even I know that this can't all be put on Blago. This misuse and abuse of taxpayers dollars has been the Chicago way for a long time. Unfortunately the words politician and indictment are often heard together in this state, primarily the Windy City.
We owe our thanks to the Chicago newspapers and a few others for doing investigations into the politics of Illinois and the other stories on abuse, fraud, corruption, etc. It is time that those who have gotten ill gains to pay back the money to taxpayers', insurance companies, and those they have illegally exploited, etc. As I was illegally told that I could not have any honest lawyers involved. It is our legal right and no one has any right to bark illegal orders or abuse their power of authority and exploit. It is time that the people take back what is supposed to be the peoples' government. What we have been forced to deal with goes under tyranny.
Here we go Again, if you or I mis-stated or lied on a financial report, to get funds we would be looking at Jail time but, if a Government or bank did, nothing happens.
This is & will be our failure as a nation because there is NO RULE of LAW....!
So, what has been the bond rating agencies response to this ???
So, what has been the bond rating agencies response to this ???
Always look for the UNION label...
No cause for concern. Chicago and Cook County will still overwhelmingly vote Democrat. Illinois will get worse and worse but the voters of the Chicago area will still blindly vote Democrat even after the state collapses. There is literally nothing that will persuade the majority of the voters in Chicago and Cook County to do otherwise.
The IL government lied??? C'mon, it is Illinols - standard operating procedure.
Misled? OF COURSE THEY DID! They lied right to your face! Szeech! It's ILLINOIS for cryin' out loud! Four years of Obama and you dolts STILL are clueless....in the words of the immortal W.C Fields "Never give a sucker an even break and never smarten-up a chump"....
Whats astonishing is the voters keep voting these lying cheating dems back into office.
The reason why is most of them are gubmint educated low information voters.
Blagojevich is just a fall guy because he's defenseless, and in prison. This has been going on for decades, under Democratic control. This is the islamist In-Control model for the rest of the nation!
Democrats are crooks. Democrats in Illinois are huge crooks. If the SEC found this problem in any private sector situation there would be jail time, unless you are a Democrat-see John Corzine...........
The information on government worker pensions are being misrepresented around the Nation. States and the Fed allow phony accounting like mark to myth, sorry mark to market. If you want to see how bad it is and have a strong stomach check out .pensiontsunami.com. In CA there is an estimated $500 Billion shortfall, around the nation $2 to $3 TRILLION.
The information on government worker pensions are being misrepresented around the Nation. States and the Fed allow phony accounting like mark to myth, sorry mark to market. If you want to see how bad it is and have a strong stomach check out w w w.pensiontsunami. com. In CA there is an estimated $500 Billion shortfall, around the nation $2 to $3 TRILLION.
lol, the SEC is s joke.
www.WebAnon.da.bz
an Illinois democrat lied? I am shocked
....The "Peoples Republic of Illinois" would never lie......why no socalist or communist regime has ever told a lie, now they might cheat, steal, slander, over ride the public will, and attack individual liberties and break the law.....but lie, never!
How is California getting away with an estimated 300 billion pension shortfall? The courts found the ballot measure which authorized high speed rail was fraudulently written by our leaders. So now they have upped the cost too 100 billion. I think your leaders are amateur's compared to Sacramento . That is 400 billion in fraud,theft, and mismanagement. Maybe some California leaders should join Blagojevich in jail .
I feel I must assert my freedom to comment on an important public issue that Gov. Blagojevich has thrust into the vortex of public comment. Some background is in order: I could write a hundred letters about how Gov. Blagojevich worships his own ignorance. I can tell innumerable stories about Gov. Blagojevich's desire to transform our whole society to suit his own directionless interests. And I can show you that lying and cheating is second nature to him. Regardless of what I do, however, I have never been in favor of being gratuitously puzzleheaded. I have also never been in favor of sticking my head in the sand or of refusing to treat the blows of circumstance and encourage others to do the same. Some people think that free speech is wonderful as long as you're not bashing him and the oppressive, impulsive stumblebums in his yahooism movement. Others believe that this should not and need not be the case. The truth lies somewhere in between, namely, that Gov. Blagojevich is frightened that we might keep his apocrisiaries at bay. That's why he's trying so hard to prevent whistleblowers from reporting that bitterness seeps out of him like blood from an underdone ribeye steak. That extreme bitterness is, as far as I can tell, what leads Gov. Blagojevich to direct social activity toward philanthropic flimflam rather than toward the elimination of the basic deficiencies in the organization of our economic and cultural life. Many the things I've talked about in this letter are obvious. We all know they're true. But still it's necessary for us to say them because compared to lubricious doofuses like Gov. Blagojevich, every pimp is a man of honor.
If you compare your state to California, you appear to financial wizards.
I feel I must assert my freedom to comment on an important public issue that Gov. Blagojevich has thrust into the vortex of public comment. Some background is in order: I could write a hundred letters about how Gov. Blagojevich worships his own ignorance. I can tell innumerable stories about Gov. Blagojevich's desire to transform our whole society to suit his own directionless interests. And I can show you that lying and cheating is second nature to him. Regardless of what I do, however, I have never been in favor of being gratuitously puzzleheaded. I have also never been in favor of sticking my head in the sand or of refusing to treat the blows of circumstance and encourage others to do the same. Some people think that free speech is wonderful as long as you're not bashing him and the oppressive, impulsive stumblebums in his yahooism movement. Others believe that this should not and need not be the case. The truth lies somewhere in between, namely, that Gov. Blagojevich is frightened that we might keep his apocrisiaries at bay. That's why he's trying so hard to prevent whistleblowers from reporting that bitterness seeps out of him like blood from an underdone ribeye steak. That extreme bitterness is, as far as I can tell, what leads Gov. Blagojevich to direct social activity toward philanthropic flimflam rather than toward the elimination of the basic deficiencies in the organization of our economic and cultural life. Many the things I've talked about in this letter are obvious. We all know they're true. But still it's necessary for us to say them because compared to lubricious doofuses like Gov. Blagojevich, every pimp is a man of honor.
I agree Merman, Blagojevich completely just turned a blind eye to public interest.I have not sympathy for me.