SEC charges Illinois with securities fraud

[Stanley]

And it relates to their pension system. Apparently, they did not disclose information relating to underfunded pensions to bond buyers.

Interestingly, in the two cases where the SEC went after a state, it had to do with pension funding.

SEC Charges Illinois Over Pension Funding - WSJ.com

 

[golfnut]

Anfd it figures, Illinois would be one of the states

 

[steelyman]

I was told this morning that the SEC does not make public information about their charges. If true, that means it was leaked from Illinois.

That dovetails with their current push against pensions.

 

[Texas Proud]

I was told this morning that the SEC does not make public information about their charges. If true, that means it was leaked from Illinois.

That dovetails with their current push against pensions.

Since the link did not get me the article, I looked it up...

Seems you were told wrong... from the SEC...

SEC Charges Illinois for Misleading Pension Disclosures; 2013-37; March 11, 2013

 

[steelyman]

Since the link did not get me the article, I looked it up...

Seems you were told wrong... from the SEC...

SEC Charges Illinois for Misleading Pension Disclosures; 2013-37; March 11, 2013

OK, thanks. Regardless, these guys are gonna whack me (and many I know) in the face

 

[MichaelB]

From the linked article

According to the SEC’s order, Illinois took multiple steps beginning in 2009 to correct process deficiencies and enhance its pension disclosures. The state issued significantly improved disclosures in the pension section of its bond offering documents, retained disclosure counsel, and instituted written policies and procedures as well as implemented disclosure controls and training programs. The state designated a disclosure committee to assemble and evaluate pension disclosures. In reaching a settlement, the Commission considered these and other remedial acts by Illinois and its cooperation with SEC staff during the investigation. Without admitting or denying the findings, Illinois consented to the SEC’s order to cease and desist from committing or causing any violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.

So, a stern finger wagging given, deficiencies corrected, case closed, nothing more to worry about.

Consent decree: I do not admit to doing anything wrong, but I promise not to do it again. No matter how hard I tried, this never worked for me.

 

[REWahoo]

OK, thanks. Regardless, these guys are gonna whack me (and many I know) in the face

I thought the mob usually went for the kneecaps, not the face. Guess times have changed...

 

[ERD50]

I was told this morning that the SEC does not make public information about their charges. If true, that means it was leaked from Illinois.

That dovetails with their current push against pensions.

Since the link did not get me the article, I looked it up...

Seems you were told wrong... from the SEC...

SEC Charges Illinois for Misleading Pension Disclosures; 2013-37; March 11, 2013

So this makes me curious steelyman - who told you this? I guess I'm just wondering if there is a tie-in with the phrase 'their current push against pensions'? I wouldn't describe anything going on as a 'push against pensions', but IL certainly has a budget problem, and a hugely underfunded pension system. Something has to give.

edit/add: I'm also curious about something else - what are IL bonds currently going for?

-ERD50

 

[steelyman]

From the linked article

So, a stern finger wagging given, deficiencies corrected, case closed, nothing more to worry about.

Consent decree: I do not admit to doing anything wrong, but I promise not to do it again. No matter how hard I tried, this never worked for me.

... not much help for current retirees, though.

 

[MichaelB]

... not much help for current retirees, though.

I do not see any impact to any current or future retirees. The Illinois pension fund shortfall has been well documented for many years, certainly not a surprise to investors.

 

[steelyman]

So this makes me curious steelyman - who told you this? I guess I'm just wondering if there is a tie-in with the phrase 'their current push against pensions'? I wouldn't describe anything going on as a 'push against pensions', but IL certainly has a budget problem, and a hugely underfunded pension system. Something has to give.

edit/add: I'm also curious about something else - what are IL bonds currently going for?

-ERD50

This could get too inflammatory. It doesn't matter who told me, but they used to work for Congress. We in the state pension system just need to figure out how to adjust our plans.

 

[steelyman]

I do not see any impact to any current or future retirees. The Illinois pension fund shortfall has been well documented for many years, certainly not a surprise to investors.

It's not investors I am talking about, but benefits for retirees. Agreed, though, the topic is really about investors.

 

[Texas Proud]

I was told this morning that the SEC does not make public information about their charges. If true, that means it was leaked from Illinois.

That dovetails with their current push against pensions.

Since the link did not get me the article, I looked it up...

Seems you were told wrong... from the SEC...

SEC Charges Illinois for Misleading Pension Disclosures; 2013-37; March 11, 2013

OK, thanks. Regardless, these guys are gonna whack me (and many I know) in the face

Thinking about it... this was the final outcome and not a charge... so maybe your info was correct... who knows when they were first charged....

This also has nothing to do with fixing the problem.... the SEC just wants to make sure they disclose the information to investors... as long as they know, everything is OK.....

 

[gerrym51]

I thought just about ALL states were underfunded for pensions-most cities also.
It's a time bomb.

 

[clifp]

I thought just about ALL states were underfunded for pensions-most cities also.
It's a time bomb.

Yes most are. Illinois is just in worse shape than pretty much every one else. But they lied to bond rating agencies, analysts etc. about how bad the problem was with the pension obligation.

It seems to me one of the ironies is that probably most of the investor in IL muni bonds are in fact fairly wealth Illinois residents. So they get hit with a double whammy the bonds they bought credit rating has sunk, lowering their value. Plus they are going to have to pay higher taxes to bail out the underfunded pensions.

 

[obgyn65]

So what does this mean for those who live in Illinois ? More taxes ?

I do not see any impact to any current or future retirees. The Illinois pension fund shortfall has been well documented for many years, certainly not a surprise to investors.

 

[ERD50]

So what does this mean for those who live in Illinois ? More taxes ?

We recently had a 67% increase in IL Income Tax. Could be more coming.

There are still some huge budget issues and long-term liabilities. And politicians can't seem to learn to keep their hands off money that is not theirs. They just had the case against Jesse Jr and his wife, now Beavers is on trial, and a string of governors who have been sentenced. Not a pretty picture.

-ERD50

 

[ziggy29]

I think this is symptomatic of a history of making benefit promises that could only be met by plugging in investment returns which are not realistic over the long term. When you require a return of 8% or more in an environment that has returned a lot less than 8% over a prolonged period of time, the pressure to take unacceptable risks (this is a pension fund, not a billionaire's "play money" stash) leads to things like this (and other shenanigans).

 

[Stanley]

Bring back Blago! He can sell off various state positions to the highest bidder and you can use the money to beef up the pension funds. Problem solved.

 

[ERD50]

I think this is symptomatic of a history of making benefit promises that could only be met by plugging in investment returns which are not realistic over the long term. When you require a return of 8% or more in an environment that has returned a lot less than 8% over a prolonged period of time, the pressure to take unacceptable risks (this is a pension fund, not a billionaire's "play money" stash) leads to things like this (and other shenanigans).

That is part of the problem, no doubt. But I think IL has created a whole slew of problems on it's own, and that might even be a small part of the pie.

-ERD50

 

[youbet]

That is part of the problem, no doubt. But I think IL has created a whole slew of problems on it's own, and that might even be a small part of the pie.

-ERD50

A Crain's article showed that the Illinois pension problem was caused by the failure of the state to make its annual contributions. Poor investment returns were a small factor. State employees always contributed their full share via payroll deduction.