“The ‘blame game’ does not solve the present predicament of the Fund…. The Fund is also partially responsible for the mess that it is in,” the judge said in one of his footnotes. “It has been too generous in allowing the grandchildren and great grandchildren of the first generation of retirees to obtain benefits long after the original retiree has died…. The Fund is not for the children of the retirees’ children…. The present administration did the right thing in replacing the defined benefit plan with the defined contribution plan. It stopped the bleeding and made possible to ascertain how many retirees are left in the defined benefit plan, how long they and their spouses will live and how much money will be needed to take care of them.”
In the footnote on page 7, the judge couldn’t resist saying, in so many words, “I told you so”: “[T]his entire matter could have been avoided had the government shown a little foresight during the commonwealth’s economic boom.” He said the Legislature should have imposed a higher user fee on garment factories as he himself had repeatedly urged on the editorial pages of this newspaper. But in those days, local labor and immigration legislation could not pass without the imprimatur of what was basically the fourth branch of government — the garment industry. The hiring of Jack Abramoff, the repeal of the gradual wage hike and the three-year stay limit for guest workers as well as the dilution of the other “reforms” promised by the CNMI government to the feds were done at the behest of the almighty garment industry. Then-Speaker Diego T. Benavente watched helplessly as his colleagues turned his proposal to cap the number of garment workers into a virtual opening of the floodgates. Attrition became addition. The “cap” allowed the factories to triple the size of their foreign workforce and the rest is, well, what we’re all looking at right now.
Judge Govendo said if the user fee was increased “and that tax…earmarked for the Retirement Fund, the Fund most likely would have become fully funded and the money could have been invested in relatively secure triple A corporate bonds, treasury bills and long-term FDIC insured certificates of deposit. Had this been done, present and future pensioners would be spared the gut-wrenching news of the ups and downs of the stock market and the almost monthly dire predictions that the Fund will run out of money in two to five years.”
That’s the windup. Here’s the pitch: “The reality of the situation appears to be that benefits will have to be reduced to keep the Fund viable.” (My italics.)
The judge was also critical of the Fund officials’ “underserved reverence” for the agency’s consultant, Merrill Lynch. “[T]hey seem to be cheerleaders for Merrill Lynch even though its investment strategy has turned out to be an irresponsible disaster for the Fund.” (My italics.) “[T]he people responsible for managing [the Fund] merrily allow Merrill Lynch to think for them and subject the retirees to a heart attack every month when the value of the Fund is published.”
Wait. There’s more.
“The court also notes that it was never brought out exactly what the investment counselors earn for managing the Fund’s investments. But one wonders whether they also take a share of the losses when their decisions negatively impact the Fund’s assets.”
In his final footnote, Judge Govendo listed what the Fund wants from the government in addition to “the sum certain and lost opportunity monetary damages”: 1,000 shares of common stock in the Pacific Islands Development Bank, the Marianas House in D.C., the two vehicles used by the now defunct Washington rep.’s office, the MPLT interest that goes to the general fund, all revenue-generating public lands as well as the public lands on Capital Hill, behind Garapan Elementary School, the Samoan housing units on Navy Hill and in the seaport area between the Army Reserve area and the area across from the Shell gas station in Puerto Rico.
In other words, the Retirement Fund, an agency with unelected officials, wants to have all the marbles.
“Chilling” is the word you’re thinking of right now.
Voters, in any case, should remember that the lawsuit against the Fund was filed by then-Chairman Joe Reyes, who was on his way out in the summer of 2006, the first year of the Fitial administration. Reyes at the same time advised retirees and Fund members to file a lawsuit in federal court. It was also Reyes who challenged P.L. 15-15 in court. The then-legal counsel of the Fund was Joseph N. Camacho, the husband of the current counsel. Former Senator Juanpan became chairman in Feb. 2007.
The new governor, of course, wanted a more “reasonable” Fund board. But once his appointees were sworn in, they were apparently told that they might be held personally liable if they dropped the lawsuit “so favored by the lawyers,” as a government official told me.
It also didn’t help that the Fund chairman — who served for six years as a lawmaker and was a major player in previous gubernatorial campaigns — is now running for the top post.
“Why is he running against us?” asked an administration official. “He and the governor agree on almost everything.”
In his conclusion, Judge Govendo said that before the hearings started on April 20, he was advised that “the parties wished to discuss settlement. After that the word ‘mediation’ was brought up by the government. The court encouraged both parties to pursue these avenues since the court has always believed that both parties have a better idea than the court as to the amounts that were claimed and due and what could be paid. Unfortunately, no settlement has materialized at the time of this decision. The court is still of the opinion that settlement, rather than enforcement of a judgment, is the best way to resolve this matter.” (Again, my italics.)
But it now seems that the best way for the commonwealth is bad for a gubernatorial candidate who wants to “save” the government…by pushing it to the brink.
***
As you read this, I will be in Manila already, enjoying the pollution and the jostling of more than 10 million people in a city under a fresh terror threat. This column and my other editorials will be back on Aug. 7.
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