New Jersey's $26 billion bond debacle

[marmar]

Aug. 19 (Bloomberg) -- You are responsible for your bond issues.

That was the subject of a speech Paul S. Maco, the first director of the Securities and Exchange Commission’s Office of Municipal Securities, used to give more than a decade ago. The speech was aimed at public officials, and was an earnest reminder of their duties to investors when they tapped the municipal market.

I always liked that speech. It looks like New Jersey officials never heard it.

Yesterday, New Jersey became the first state ever accused by the SEC of violating federal securities laws. Between 2001 and 2007 and not very long after Maco gave that speech for the last time -- he joined Vinson & Elkins in Washington in 2000 -- the state failed to tell investors that it was underfunding its pension plans.

In 79 bond issues totaling more than $26 billion, the state misrepresented what was really going on behind the scenes, the SEC said in its cease-and-desist order. Offering documents to bond issues are called official statements. Here’s what the SEC said in its complaint against the state:

“The Treasurers did not read official statements, and relied on their staff to ensure the accuracy of the information contained in the documents,” the SEC said. “Treasury had no written policies or procedures relating to the review or update of the bond offering documents.” ............(more)

The complete piece is at: http://noir.bloomberg.com/apps/news?pid=20601039&sid=aMqCGjCkQbjA