On Monday, the SEC accused the state of Kansas of securities fraud, alleging that it failed to disclose funding problems with its public pension when it held bond offerings in 2009 and 2010. Kansas is now the third state the SEC has taken action against for violating municipal bond disclosure rules. New Jersey was first in 2010, and Illinois was second last year.
Having been under investigation for the past four years, the state has implemented reforms regarding how it discloses its pension liabilities and has agreed to settle the charges for its past failures to disclose without either admitting or denying the charges.
According to the SEC, the Kansas pension system was so underfunded that it created a repayment risk for investors holding the state’s bonds, but in bond offering documents the state did not explain the existence of the significant unfunded liability. Kansas also should have described how the state legislature could have appropriated funds to cover the pension liability, thus making less money available for spending in other areas, including debt service payments.
Governor Sam Brownback, who took office in 2010, pointed to reforms passed in 2012 to boost contributions from both employers and employees, and enroll new workers in a plan resembling 401(k) accounts in the private sector. “Under my administration, we have improved transparency in the reporting system and taken decisive actions to meet our existing obligations and maintain the trust of our state workers and retirees,” he said.
If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.