News Update: New Jersey’s Securities Fraud
The Securities and Exchange Commission issued a cease-and-desist order to the State of New Jersey on Wednesday after discovering the state had been falsely claiming public workers’ pensions were properly funded. Investors bought more than 26 billion dollars worth of New Jersey bonds without understanding the extent of the state’s financial troubles.
The fraud began in 2001 when no actual money was put behind increased retirement benefits for New Jersey teachers and state employees. A “five-year plan” to use money in the enhancement fund toward pension funds also had no monetary backing.
New Jersey’s pension fund is one of the largest state funds in the country, and the state must now come up with tens of billions of dollars by raising taxes or cutting public services to back up its promises.
New Jersey has agreed to accept the cease-and-desist order without admitting or denying the accusations. The SEC did not impose a financial penalty or single out any individuals responsible for the fraud. This is the first SEC securities-fraud case against a state.
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