U.S. Securities and Exchange Commission building in Washington, D.C.
U.S. Securities and Exchange Commission building in Washington, D.C. (Photo: Michael A. Scarcella/ALM)

The Port Authority of New York and New Jersey has agreed to pay the U.S. Securities and Exchange Commission a $400,000 penalty to settle allegations that it impermissibly raised at least $2.3 billion in bond revenue to pay for transportation projects in New Jersey that did not belong to the authority.

The SEC and the Port Authority announced the agreement Tuesday afternoon.

Most of the money raised in March 2011, about $1.8 billion, was used to rebuild the Pulaski Skyway, which links Newark to Jersey City. The Port Authority is not allowed to pay for work on projects it does not own or operate, and the Pulaski Skyway is owned and maintained by the N.J. Department of Transportation.

The SEC and the Manhattan District Attorney’s Office opened an investigation into the project shortly after federal prosecutors began investigating the Bridgegate scandal, in which two of Republican New Jersey Gov. Chris Christie’s close aides were convicted of purposefully closing local access lanes to the George Washington Bridge, which the Port Authority owns, as a means of retaliating against a Democratic politician.

The reasons behind the Port Authority’s decision to fund the projects has never been made clear.

In its statement, the SEC noted that the Port Authority agreed to issue the bonds despite an internal memo that said there was “no clear legislative authority to undertake such projects.”

“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 Calamari, the director of the SEC’s New York regional office. He added that the Port Authority is the first municipal issuer to admit wrongdoing in an SEC enforcement action.

The Port Authority, the SEC said, violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933.

In a separate statement, the Port Authority noted that it has been cooperating with the SEC and that no investor lost money.

The Port Authority said it has “made significant governance reforms since March 2011 to ensure that 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.”

The Port Authority, in its statement, said agency leadership at the time believed it had a “reasonable basis” for concluding that funding the DOT projects was within the Port Authority’s powers.

At the time of the bond sales, the Port Authority chairman was former N.J. Attorney General David Samson, a Christie confidante who in July 2016 pleaded guilty to a bribery charge before a federal judge in Newark. Samson admitted using his authority as chairman of the Port Authority to convince United Airlines to institute nonstop flights from Newark Liberty International Airport to Columbia, South Carolina, for his own personal benefit. Samson owned a summer home in South Carolina. United agreed to pay a $2.25 million penalty for its role in the case.

Samson was a founding partner at politically connected West Orange’s Wolff & Samson, which has since become Chiesa Shahinian & Giantomasi. The firm is now headed by another Christie confidante, former state Attorney General and former Republican U.S. Sen. Jeffrey Chiesa.

Samson, 77, who was New Jersey’s attorney general from 2002 to 2003 and served as Port Authority chairman under Christie from 2011 to 2014, pleaded guilty to knowingly and corruptly soliciting, demanding and accepting something of value, 18 U.S.C. 666(a)(1)(B).

The maximum statutory penalty Samson faces is 10 years in prison and a fine of $250,000, but the plea agreement he reached with the U.S. Attorney’s Office carries a maximum prison term of 24 months. Samson is scheduled to be sentenced in March.

The Port Authority is a joint venture between New York and New Jersey and owns and operates that region’s three major airports, cross-Hudson bridges and tunnels and various real estate holdings. The New Jersey governor selects the chairman, while the New York governor appoints the executive director. The governors of each appoint six commissioners to its Board of Commissioners subject to state Senate approval, according to the authority.

Christie’s office referred inquiries to the Port Authority. The office of Democratic New York Gov. Andrew Cuomo did not respond to a request for comment.

Correction: An earlier published version of this article incorrectly stated that the Port Authority impermissibly raised $2.3 million in bond revenue to pay for projects not belonging to the Port Authority. The correct figure is $2.3 billion.