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SEC, Illinois settle pension charge

SPRINGFIELD, Ill. — Federal authorities announced Monday that Illinois has agreed to settle a securities-fraud charge that accused the state of misleading investors about the financial health of its public-employee pension systems, which are now $96.7 billion short of what’s needed to cover promised retirement benefits.

In a cease-and-desist order issued by the Securities and Exchange Commissions, Governor Pat Quinn’s administration admitted no wrongdoing in the way state officials borrowed money to pay pension obligations through $2.2 billion in municipal bond sales from 2005 to early 2009.

The SEC began its investigation in September 2010, shortly after signing an agreement with New Jersey over similar pension disclosures. Quinn’s assistant budget director, Abdon Pallasch, said the governor began making changes before the investigation started and that the SEC agreed his office cooperated fully in its review.


The charge revolves around how well Illinois officials publicized their handling of seriously underfunded public-employee pension accounts. Quinn and the Legislature say they have made finding a solution this spring their priority.

The SEC alleged that the state made misleading statements about how much pension changes would save or that it omitted statements about the full impact of underfunding problems.