Feds fine Port Authority $400K over Pulaski Skyway project borrowing
The Port Authority of New York and New Jersey must pay $400,000 to settle a federal investigation into the agency borrowing money to pay for work on New Jersey’s Pulaski Skyway.
Federal officials say the settlement is the first time a local government agency has admitted wrongdoing in an enforcement action by the Securities and Exchange Commission.
And it’s the latest black eye for the bi-state agency, which critics have said has been used by Gov. Chris Christie’s administration to reward political supporters and punish detractors. Two former Christie appointees to the Port Authority were convicted over their involvement in the George Washington lane closure scandal, while the state’s top officials at the agency, David Samson, is awaiting sentencing over a bribery scheme that squeezed United Airlines for personal flights.
The SEC took issue with the Port Authority offering $2.3 billion in bonds without disclosing to investors that the agency might not be legally permitted to use the funds for construction work on the aging Skyway and other roadways.
The Port Authority has oversight over the bridges and tunnels across the Hudson River, but not the Pulaski, which connects Newark to Jersey City.
The SEC and the Port Authority issued dueling news releases Thursday on the case.
“The Port Authority represented to investors that it was authorized 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.”
While the Port Authority agrees that it acted “negligently,” the agency said Thursday that “there is no finding that the Port Authority acted willfully or even intentionally.”
The Port Authority maintains it had the legal authority to expend the funds.
“No bondholder suffered any loss and no bond proceeds were ultimately allocated to fund the roadway projects,” the Port Authority said. “The agency has already made significant governance reforms since March 2011 to ensure there will be no recurrence of the ‘negligence’ found by the SEC and views its $400,000 payment as modest compared to the cost of litigation.”
Among the reforms cited by the Port Authority is the use of outside attorneys to serve as bond and disclosure counsel for bond offerings.