Inos, in his transmittal letter to Senate President Paul A. Manglona, Ind.-Rota, and Speaker Eli D. Cabrera, R-Saipan, said he recognized how “controversial” Senate Bill 17-43 is.
He said “much discussions and deliberations were considered and weighed on the administration’s part as well in approving this bill.”
But Retirement Fund Board of Trustees Chairman Sixto Igisomar, in an interview, said the new law “is another unknown variable that is dumped into the equation.”
The Fund opposed the measure and asked the governor to veto it.
“There’s going to be some additional calculations that will be involved,” Igisomar said.
Introduced by Senate Floor Leader Pete P. Reyes, R-Saipan, S.B. 17-43, now Public Law 17-51, allows retirees and other Fund beneficiaries to maintain causes of action on behalf of the Fund when the board of trustees refuses to do so. This is called “shareholders’ derivative action” which proponents say is common throughout the U.S.
Now that it’s law, the retirees can sue “anyone or any entity who has done harm to the Retirement Fund.”
Inos said while those opposed to the bill raised concerns that have merits, the measure “places sufficient safeguards to address those.”
The Fund’s portfolio has reached a point wherein members have become “gravely concerned about its longevity and should be allowed to pursue action if there is clear evidence against those entrusted to properly invest monies on their behalf, especially if the board of trustees refuses to act for the best interest of the retirees and members,” Inos said.
The Fund’s board signed a deal last June with eight money managers: Mellon Capital Management, Blackstone Alternative Asset Management, Aetos Alternative Management, LLC, Lighthouse Investment Partners, LLC, Franklin Templeton Financial Services Corp., Pictet Asset Management Limited, Pacific Investment Management Company, LLC and Cohen & Steers Capital Management Inc.
Maggie Ralbovsky of Wilshire Associates said the bill “is not going to be good for business.”
She added, “That is going to create a negative selection effect for the [Fund] board to find qualified advisers and money managers.”
She said S.B. 17-43 strips them of protection against frivolous lawsuits.
If it becomes law, “we have to re-evaluate whether we can continue to do business here,” she said.
She described the measure as “one sided” and “unfair to the vendors of the Fund who already have contracts in place.”
Inos said the new law still requires the beneficiaries to request the trustees to take action first.
It also requires the beneficiaries to allow reasonable time for the trustees to act or decide not to act, he added.
Inos said it also has provisions to prevent frivolous claims, and contrary to the Fund’s position, litigation and the cost of doing business are unlikely to rise as a result of the new law.
Unbelievable
Igisomar who met with the Fund administrator and legal counsel yesterday afternoon said “we did not believe its intent” referring to the new law.
“We were never favorable. We actually stated that we disagree with it,” he said.
Everybody, he said, knows the fiscal status of the Fund. It’s in a very poor fiscal state. But now that the bill is law, “there’s nothing much I can really say right now.”
Saving the money of more than 3,000 retirees and more than 3,000 active members is what the board of trustees is here for, Igisomar said.
The trustees’ job is to manage and protect the interest of those who have been receiving benefits and those who are still putting their money into the Fund, he added.
The CNMI’s pension system was made and developed for government employees, he said.
“These are all the good workers who gave up other opportunities…in return for a pension plan which is the best in comparison with those offered by the private sector,” he added.
Asked if the Fund can still be saved, Igisomar said, “You look back at the people who worked so hard for the government and ask them that question.”
He said they cannot just tell the more than 6,000 retirees and members that all their money is gone.
What the Fund has been doing lately, he said, is reducing costs. “We have been very conservative and frugal in spending,” he added.
“We would do whatever we need to do to save the Fund and have a pension for everybody that they were promised to have.”
