Port Authority Faces SEC Probe Following Bridge ScandalMartin Z. Braun
The Port Authority of New York & New Jersey, the agency at the center of a scandal involving lane closings last year at the George Washington Bridge, faces a U.S. Securities and Exchange Commission investigation.
The SEC is investigating whether the authority improperly used tax-exempt debt to finance the $1 billion renovation of the Pulaski Skyway, an 82-year-old roadway that connects Newark and Kearny to Jersey City, according to a person with knowledge of the probe who asked not to be identified without authorization to speak publicly.
The Port Authority, which runs the New York area’s three major airports, four bridges, a bus terminal, commuter rail, two tunnels, ports and the World Trade Center in Lower Manhattan, for decades has been a source of patronage and perks. Its dealings have drawn intense scrutiny since New Jersey Governor Chris Christie was ensnared by accusations that his allies engineered September traffic jams at the George Washington Bridge as retribution for a mayor who didn’t support his reelection.
The revelations triggered investigations and the resignations of three Port Authority officials. Reports of conflict of interest, political abuse and interstate rivalry have also spawned efforts by agency commissioners and the governors of the two states to restructure the agency.
In April, New Jersey state Senator Raymond Lesniak, a Democrat, wrote to the SEC asking for an investigation into the Port Authority’s use of tax-exempt bonds to fund projects that aren’t in its jurisdiction.
“The Port Authority appears to have misused the securities marketplace, made misrepresentation and misstatements of material facts in disclosure documents and falsely asserted a tax exemption -- for an unauthorized and therefore unlawful project,” Lesniak wrote in the April 3 letter.
Judith Burns, a commission spokeswoman, declined to comment on the probe, which the authority disclosed yesterday in papers prepared for a bond sale.
The SEC has been stepping up enforcement of fraud cases involving state and local bond sales. In recent years, it settled cases with New Jersey, Illinois and Harrisburg, Pennsylvania, for making misleading or inadequate disclosures.
This month, the SEC sued a Chicago charter-school operator for inadequately disclosing contracts with companies owned by an executive’s brothers, which the agency said threatened bond investors. The operator settled without a penalty by appointing an independent monitor.
In 2010, Christie killed a planned $8.7 billion commuter-train tunnel under the Hudson River that would have included $3 billion in Port Authority money. He then asked the agency to spend $1.8 billion on the Pulaski Skyway and other New Jersey road projects. Its board acceded.
Lesniak said in an interview today that the arrangement was “deceptive.”
The Port Authority’s compact requires it to secure approvals from both states before spending money on projects outside its assigned region, which doesn’t include the Pulaski Skyway, he said.
Only after the funding vote did authority lawyers produce an analysis contending that the Pulaski Skyway is a feeder to its Lincoln Tunnel, which is about seven miles (11 kilometers) away, Lesniak wrote in his letter to the SEC.
Manhattan District Attorney Cyrus Vance Jr. is also investigating whether the Pulaski financing was improper, Bloomberg reported April 12.
The Port Authority is responding to grand jury subpoenas from federal and state prosecutors “pertaining to Port Authority’s involvement in certain specified projects and activities,” according to papers released yesterday for the upcoming bond sale. “The Port Authority has also been advised that the Securities and Exchange Commission is conducting a parallel investigation in one of the matters under review.”
Word of the investigation was a sign of “a wider pattern” of abuse, according to Senator Loretta Weinberg, a Democrat from Teaneck who is co-chairwoman of a legislative committee investigating the bridge closings.
“The more I read and learn, the less surprised I am,” Weinberg said in a telephone interview.
Paul Loriquet, a spokesman for the state attorney general’s office, which can represent the administration, said in an e-mail that he would have no comment on the probe. Kevin Roberts and Michael Drewniak, spokesmen for Christie, didn’t immediately respond to e-mailed requests for comment.
Rich Azzopardi and Matt Wing, spokesmen for New York Governor Andrew Cuomo, didn’t respond to a request for comment on the investigation.
James Brennan, the Brooklyn Democrat who heads a New York Assembly committee that oversees the Port Authority, said cash from its bonds is restricted.
“The Securities and Exchange Commission has a right to protect investors and has the authority to investigate whether bond proceeds are used for the purpose they tell investors they’ll be used for,” Brennan said by telephone. “That’s their job.”