Port Authority of NY-NJ settles SEC probe into roadway projects

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By Hilary Russ | NEW YORK

NEW YORK The Port Authority of New York and New
Jersey has agreed to pay $400,000 to settle allegations it
failed to inform investors of risks to roadway projects,
becoming what the U.S. Securities and Exchange Commission said
was the first municipal bond issuer to admit wrongdoing in such
a case.

The SEC’s probe is part of a sprawling web of investigations
that began following the so-called Bridgegate controversy, the
politically-motivated closure of several lanes at the George
Washington Bridge in 2013.

Reuters was first to report in April that the bi-state
agency, which underwent governance changes following intense
scrutiny in the fallout of the Bridgegate scandal, was in talks
with the SEC.

The authority operates airports, bridges and tunnels in the
region, which produces 10 percent of the nation’s economic
output, according to the U.S. Census Bureau.

According to the SEC, the authority held internal
discussions about whether certain projects, including New
Jersey’s Pulaski Skyway, were outside its mandate and might not
be legal.

Internal authority memos noted there was “no clear path to
legislative authority” for such projects, the SEC said in a
statement on Tuesday.

Yet the authority sold $2.3 billion of bonds between January
2012 and June 2014 without disclosing the risks around its
ability to fund the projects.

The SEC said its investigation is ongoing. However, in a
letter seen by Reuters on Tuesday, the Port Authority told the
commission that over the last eight to nine months of
negotiations “nothing… remotely suggests that any aspect of it
is ‘continuing.'”

The authority said the SEC’s “misleading” information “is
causing severe, immediate and entirely unjustified damage to the
Port Authority’s position in the marketplace as a municipal
issuer, its reputation and the reputations of the individuals
concerned.”

The authority also said its acknowledgement that it violated
securities laws was neither tantamount to “wrongdoing” nor a
first in the nation, as the SEC claimed.

The SEC did not reply to requests for comment on the
authority’s protests.

The case stemmed from board approval in March 2011 – before
the current leadership was in place – to fund roadway
improvements at and around the Pulaski Skyway.

At issue was whether the Port Authority improperly tried to
use some of its funds for the skyway and other New Jersey
projects that were not under its jurisdiction.

That funding would have come from $3 billion earmarked for
its Access to the Region’s Core (ARC) project for a commuter
rail tunnel under the Hudson River, which New Jersey Governor
Chris Christie cancelled in 2010 because of cost overruns.

The SEC order showed that Christie plotted to redirect ARC
funding nearly six months before he cancelled the project, New
Jersey Assemblyman John Wisniewski said in a statement.

The case is a result of “Christie’s heavy-handed
interference with a supposedly independent agency,” Wisniewski
said.

The admission could lead to a short-term increase in
borrowing costs, said New York bond attorney David Fernandez.

The authority will, “at least for a short while, have to eat
some crow and face a slightly increased admission fee to access
the market,” he said.



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