Advertisement

Archive for Tuesday, August 12, 2014

U.S. settles with state over securities pension fraud

August 12, 2014

Advertisement

— Federal authorities announced Monday that Kansas has agreed settle a securities fraud charge accusing the state of misleading investors about the financial health of its public employee pension system in 2009 and 2010 — at the time the second-worst underfunded system of its kind in the nation.

The Securities and Exchange Commission said Monday that the state has consented to its cease-and-desist order to settle the case, without admitting or denying its findings. No financial sanctions were imposed. The SEC noted Kansas has since made changes and blamed insufficient procedures and poor communication between state agencies for the problem, which happened under the administration of then-Gov. Mark Parkinson, a Democrat.

“Kansas failed to adequately disclose its multibillion-dollar pension liability in bond offering documents, leaving investors with an incomplete picture of the state’s finances and its ability to repay the bonds amid competing strains on the state budget,” said LeeAnn Ghazil Gaunt, chief of the agency’s enforcement unit dealing with public pensions.

She also noted in a news release that in determining the settlement, the agency considered the state’s “significant remedial actions” to mitigate the issues and the cooperation of state officials during the investigation.

Between August 2009 and July 2010, the Kansas Development Finance Authority raised $273 million through eight series of bonds without disclosing in its offering the existence of the significant underfunded pension liability in its Kansas Public Employees Retirement System, according to the SEC order. The failure to disclose the information resulted from insufficient procedures and poor communication between the state’s Development Finance Authority and the Kansas Department of Administration, SEC said.

Gov. Sam Brownback said in a written statement that his administration has improved transparency in the reporting system and taken decisive actions to meet its obligations.

“Since taking office, I have made restoring the health of our KPERS system a priority,” Brownback said.

The Legislature in 2012 approved changes that included boosting employer and employee contributions and creating a new cash balance plan for people hired after 2015 that made “significant strides” in reducing the state’s projected pension debt by almost $500 million, the governor said.

Kansas Secretary of Administration Jim Clark also said in a statement that the agency is pleased SEC did not seek any financial penalties or make any claims of intentional misconduct based on the actions of prior administrations.

Comments

Kate Rogge 4 months, 2 weeks ago

Jeeze, Louise. "Kansas Secretary of Administration Jim Clark also said in a statement that the agency is pleased SEC did not seek any financial penalties or make any claims of intentional misconduct based on the actions of prior administrations."

What intentional misconduct from prior administrations? The SEC was identifying the Brownback administration's intentional misconduct (and this includes you, Mr. Clark). Yeah, I bet they're pleased that the SEC didn't broadcast their findings nor fine Brownback and Co.

James Howlette 4 months, 2 weeks ago

The SEC claim covers the Parkinson administration, but the pension underfunding had been going on for years and years and years.

Angela de Rocha 4 months, 2 weeks ago

Read the article Katie. ALL of the misconduct identified by the SEC -- securities fraud and misrepresentation of the true financial state of KPERS at that time -- occurred during the previous administration, during 2009 and 2010. At the time KPRS was the second-worst underfunded system of its kind in the nation, second only to Illinois. The Brownback administration was not involved in any of this because it did not come into office until 2011. The article is written in plain English, with dates and everything, and makes that crystal clear.

Kate Rogge 4 months, 2 weeks ago

Thanks, Angie. So what is it that you do at the Kansas Department for Aging and Disability Services?

James Howlette 4 months, 2 weeks ago

I hope it isn't writing motivational memos.

Kate Rogge 4 months, 2 weeks ago

Hello,

The user Angela de Rocha sent the following message to you via LJWorld.com:

==============================

Snark is as snark does. It helps to actually read and comprehend the newspaper articles before posting a response ... snark. I note you did not attempt to refute any of the facts I posted. Tsk tsk tsk. Angie

==============================

Please do not reply to this e-mail message. To send Angela de Rocha a response, visit this Web page:

http://www2.ljworld.com/users/Angela_de_Rocha/contact/

Angela de Rocha 4 months, 2 weeks ago

The primary reason Kansas was not penalized is that the Brownback administration has addressed the long-neglected and misrepresented underfunding problem Working with the Legislature, the Brownback administration made public the $10 billion underfunded position and worked hard to correct it -- funding KPERS at twice the rate the previous administration did, and established a cash-balance plan for new hires that will begin January 1, 2015. The average annual state contribution to KPERS during Sebelius administration was $173 Million. The average annual state contribution to KPERs during Brownback administration: $327 million, AN 89 PERCENT INCREASE IN KPERS FUNDING UNDER GOVERNOR BROWNBACK.

James Howlette 4 months, 2 weeks ago

What party was also in control of the legislature during those previous administrations?

James Howlette 4 months, 2 weeks ago

I'm glad that Brownback did do one thing that wasn't completely asinine during his term. Really, I'm glad he did. It was long overdue. I thought for sure he'd turn the thing into a crappy 401k. But there's still time if everyone gives him four more years.

Richard Heckler 4 months, 2 weeks ago

We must never forget it is the Kansas GOP that has the power at the statehouse …… unfortunately been that way for several decades…….

Time to give GOP control the boot!!!

Commenting has been disabled for this item.