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Illinois hit with security fraud. Lied to bond investors; another liberal meca taking a dive
Topic Started: Mar 12 2013, 05:51 AM (300 Views)
Pat
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This state is just shy of a $100 billion deficit in pensions. Finances have been mismanaged and the concept of pay as you go has no meaning there. I bet anything that soon, the US taxpayer will be on the hook for bailing out there pensions. It's either that, or somebody gets to tell the retirees that the well run dry and the checks are not coming in the future. Plus tell current workers that their retirement plans should not count on their state pension.

The state blew the money. Yet the state is not held accountable and nobody is hanging from a tree. And who in their right might would buy bonds from Illinois?


http://blogs.suntimes.com/politics/2013/03/sec_hits_illinois_with_securities_fraud_charges.html

SEC hits Illinois with securities fraud charges, says Blagojevich budget office 'misled investors' on pension risks

By Dave McKinney on March 11, 2013


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."
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Illinois is in so much financial trouble it's frightening. I know lots and lots of state retirees as I grew up very close to Springfield.
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Pat
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You might want to tell your friends and relatives about what was just reported in the Sun. It is very frightening, where the hell are we going to dig up enough cash to bail them out. There are only so many bailouts we have left. Maybe none.
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I posted it on FB but most won't even read it. Most think nothing will ever change.
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crooks cover the entire political spectrum
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Pat
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Yep, typical American head in the sand syndrome. When the term the full faith and good credit of the United States, we all once thought it was a valid non reproachable fact. I think the logical approach is to begin seriously doubting the statement. Every nation and society has a limit as to resources available. Plus what is available is assigned priority. For instance, do the taxpayers sacrifice say social security or medicare, in lieu of bailing out 50 state pension funds? Or even ten?
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Brewster
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I was thinking much the same, Telco.

Just because Illinois Dems are indulging in creative accounting doesn't mean all Dems do, and hardly means the Reps are lily white.

Two seconds with Google turned up ths:
Republican Assemblyman Robert Schroeder has been indicted on charges he stole more than $1.8 million

I'm sure I could find many more.
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IL is a blue state but of course you can find instances of Rep fraud too. Deal with the subject though maybe.
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Brewster
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I'd be happy to deal with the subject, but Pat seemed to think the "lib" part was important.

So that needed to be cleaned up first.
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Pat
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I guess what I found out Brew was that like California, a heavily liberal governed state, that we are faced with a situation that might affect Americans that don't live in Illinois or California, yet stand a good chance of being stuck bailing them out.

Since there are many liberals who claim republican status, then as in the past, my opinion is that republicans can be liberals or act and decide as liberals. We have crooks in both parties and ones that have committed fraud, but this case narrows down to a controversial democrat governor and fraud.

I'm sorry for inferring that only liberals rip us off or commit crimes. I'm also upset that a state can weasel out of criminal sanctions, but hope that is not true for individual state government officials. I fear that some form of immunity has been granted. Which would suck.
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