The SEC charged the state with committing fraud in an administrative action that alleged officials misled bond investors about the shaky condition of its pension finances from 2005 to 2009 when Rod Blagojevich, now serving time in prison for corruption, was governor, the Chicago Tribune reported Tuesday.
Without addressing the SEC findings, Illinois agreed to the SEC order to cease and desist from committing or causing violations of federal securities law, the federal agency said.
The misleading disclosures at the center of the case -- how information should have been disclosed to potential investors -- have been corrected in recent years, the Tribune said.
"It's a pretty substantial black eye for the state of Illinois and it's really embarrassing," Chicago securities attorney Andrew Stoltmann told the Tribune. "Allegations of fraud are pretty salacious."
Gov. Pat Quinn's office said it was in Illinois' "best interests" to settle and state officials cooperated with the SEC throughout the inquiry.
Illinois is the second state to be charged with violating securities laws related to pension disclosures. New Jersey was charged in 2010.