Federal regulators accused Illinois of securities fraud today, saying officials had misled investors about the shaky state of the state pension system, the New York Times reports. The SEC said Illinois had issued false annual reports for 15 years claiming the state was keeping up with its required payments to the public pension—when in fact it was slipping further behind. Illinois passed a law in 2005 giving itself a break from even the meager payments it was making.
The SEC also slammed Illinois for issuing $2.2 billion in municipal bonds from 2005 to 2009. Those bonds were falsely marketed, the SEC said, because bond buyers and retirees would eventually vie for the same pool of scarce funds; therefore the bonds were of lower quality. The SEC and Illinois have settled, with Illinois agreeing to a cease-and-desist order without admitting any guilt. It was the second time the feds have accused a state of securities fraud; the first case, in 2010, was about New Jersey deceiving investors over its own underfunded pension system.