The port authority has agreed to admit wrongdoing and pay the penalty to settle charges that it was aware of risks to the series of projects but failed to inform the investors who were purchasing the bonds that would fund them.
The USA’s Securities & Exchange Commission (SEC) order finds that the Port Authority offered and sold US$2.3bn-worth of bonds to investors despite internal discussions about whether certain projects ventured outside its mandate and potentially weren’t legal to pursue. The projects outlined in the offering documents included the Pulaski Skyway.
One internal memo noted, “There is no clear path to legislative authority to undertake such projects.” Another memo explicitly identified “the risk of a successful challenge by the bondholders and investors” in connection with the funding of the projects.
But the Port Authority omitted any mention in its offering documents about these risks surrounding its ability to fund the projects. Its offering documents stated that it issued bonds only for purposes for which the Port Authority is authorised by law to issue bonds.
“The Port Authority represented to investors that it was authorised to issue bonds while not disclosing significant known risks that its actions were not legally permitted,” said Andrew M. Calamari, director of the SEC’s New York regional office. “Municipal bond issuers must ensure that their disclosures are complete and accurate so that investors can make fully informed decisions about whether to invest.”
The Port Authority is the first municipal issuer to admit wrongdoing in an SEC enforcement action.
The SEC’s order finds that the Port Authority violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. The SEC’s order acknowledges the Port Authority’s cooperation and prompt remedial acts. The projects at issue have proceeded as planned.