NJ Bureaucrats Should Be Criminally Prosecuted

The SEC is finally bringing a fraud case against New Jersey for its blatant fraud earlier this decade by cooking its books to show that its public pension funds were well funded. From the WSJ:

In the summer of 2001, legislators in Trenton wanted to raise pension benefits 9% for state and local government employees. But there wasn't enough money in the pension system to fund the benefits and, only months before an election, the pols didn't want to raise taxes. So the legislature cooked the books, valuing the existing assets in the plan as of their market prices on June 30, 1999, before the dot-com bubble burst. Voilà, the two main state pension funds magically had enough cash to pay higher benefits.

...And get this: Congressman Barney Frank has been pressuring credit-rating agencies to give better grades to government issuers of securities, based on the fact that they've rarely defaulted in the past. Given the poor disclosure from states and cities, we don't know how Mr. Frank can even guess whether they will perform as well in the future.

...When Goldman Sachs settled its far more dubious recent case on similar charges to those New Jersey faced, it had to pay $550 million. But New Jersey paid nothing. The SEC is apparently loath to make taxpayers foot the bill for the sins of politicians and bureaucrats. We share that sympathy but wonder why it doesn't extend to shareholders in companies sued by the agency.

Good point. I think it's also fair to point out that if this were done by a company, its management team would be in jail right now. NJ's bureaucrats get to keep their power.