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US settles with Kansas over alleged pension fraud

Published on NewsOK Modified: August 11, 2014 at 3:30 pm •  Published: August 11, 2014

WICHITA, Kan. (AP) — 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 multi-billion-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.

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