Thursday, 4:30 PM
SEC probes Big Dig bond information
By Scott Allen
and Sean P. Murphy
The US Securities and Exchange Commission is investigating whether state officials illegally misled bondholders over the past 18 months by repeatedly stating in financial disclosures to investors that Governor Mitt Romney had ordered an ongoing examination of safety in Big Dig tunnels. In fact, the state Highway Department had conducted just one safety inspection in one tunnel, the Interstate 93 tunnel.
On Friday, a spokesman for Romney’s office confirmed that federal financial regulators had asked for copies of the 25-page report of the I-93 inspection, which focused on that tunnel’s safety after water leaks occurred there in 2005. State Treasurer Timothy P. Cahill and the Turnpike Authority say they, too, have been asked to provide documents for what the Boston office of the SEC termed an ‘‘informal investigation.’’
At issue, according to a state official with direct knowledge of the SEC inquiry, is whether the state knowingly overstated safety precautions being taken in the Big Dig tunnels to boost bond sales. In the prospectus of five bond issues since March 2005, state bondwriters referred to Romney’s pledge last year to ‘‘conduct an examination of the safety of the tunnel elements’’ of the $14.6 billion Big Dig project.
The discrepancies between the bond prospectus and the extent of inspections was first disclosed by the Globe in July. The SEC requested documents in late August.
‘‘If [state officials] are certifying that the inspection has been done and it hasn’t and they keep the bond rating higher, that’s an SEC violation,’’ said Kenneth Kaiser, the agent in charge of the FBI’s Boston office, which is aiding the SEC investigation. Kaiser confirmed the investigation in an interview last month, but declined to name specific officials targeted.
The state could face fines if it is found to have violated federal rules, according to an SEC spokesman.
Romney ’s spokesman, Eric Fehrnstrom, confirmed that Romney’s office had supplied the SEC with a copy of the I-93 safety review, which concluded that the tunnel posed a ‘‘minimal risk’’ to people driving through. Fehrnstrom said the governor’s office is cooperating fully and pointed out said that the inquiry is ‘‘informal’’ rather than a major investigation. Cahill’s office and the Turnpike Authority said they were also cooperating.