WASHINGTON – The Port Authority of New York and New Jersey has agreed to admit wrongdoing and pay a $400,000 penalty to settle Securities and Exchange Commission charges that it failed to disclose risks associated with New Jersey road projects to the investors that bought the bonds to finance them.
The Port Authority is the first municipal issuer to admit wrongdoing in an SEC enforcement action, according to the SEC. However, James Sottile, the lawyer for the Port Authority, disputed that characterization in a letter he sent to the SEC following the announcement of the settlement. He said that the SEC's March 2016 settlement with California's Westlands Water District required a similar admission from the issuer that its actions had violated securities laws.The commission found that the Port Authority sold $2.3 billion of bonds to investors despite internal discussions about whether the projects the bonds were to finance were beyond the authority's mandate and therefore illegal. The bonds were consolidated bonds and, according to part of a Port Authority Consolidated Bond Resolution, could only be issued: for purposes where the authority is authorized by law to issue bonds at the time of issuance, to refund outstanding Port Authority bonds, and to serve as a unified medium for refinancing purposes.