House debates, approves beneficiary derivative bill

Almost a year after its introduction, a controversial bill allowing retirees or beneficiaries of trusts to sue if the board refuses to do so, is now on its way to the governor for action after the measure passed the House yesterday.

The House debated on a conference committee report on Senate Bill 17-43 for about an hour before adopting it. The report was adopted by a vote of 15-4, with one absence.

Adoption of the committee report, which recommends passage of the compromise version of SB 17-43, meant that the House approves the bill’s final version.

The compromise bill expands shareholder derivative actions to the NMI Retirement Fund so that individual beneficiaries can maintain lawsuits when trustees refuse to do so.

The four House members who voted “no” were Vice Speaker Felicidad Ogumoro (Cov-Saipan), floor leader George Camacho (Ind-Saipan), Rep. Frank Dela Cruz (R-Saipan), and Rep. Fred Deleon Guerrero (Ind-Saipan). Rep. Edmund Villagomez (Cov-Saipan) was off-island.

Ogumoro, during the session, repeatedly asked Speaker Eli Cabrera (R-Saipan) and her colleagues to hold off action on the bill until they hear from the Fund regarding its decision to also sue its former investment consultant, Merrill Lynch.

Camacho, for his part, said the bill’s passage should now be considered “moot” because the Fund has already sued Merrill Lynch.

Michael Dotts, whose law firm represents the retirees in their case against Merrill Lynch, said he’s “very pleased” with the passage of the bill that he said will be helpful to some 4,000 retirees.

“It’s good for all the retirees and retirees should thank the Legislature for really helping out. It gives retirees a much stronger voice in managing their own Retirement Fund, which is very important to retirees,” he told reporters.

Dotts said that, while retirees themselves can come forward and file a lawsuit if there’s an issue with the board’s decision, the bill does set parameters on what retirees can do.

“There are occasions where retirees feel the board has not acted in their best interest or someone else has not acted in the best interest of the retirees and retirees can’t understand why the board does not take legal action against the third party that has done something that has harmed the Fund. This allows the retirees to actually go after the third party to stop the third parties from harming the Fund,” he added.

Dotts said they believe the governor will support the bill.

Saipan Tribune tried but failed to get comments from Fund administrator Richard Villagomez and board chair Sixto Igisomar as of press time regarding the bill’s passage. The Fund had opposed the bill.

The Senate passed the compromise bill on Aug. 3 by a vote of 5-1 with two abstentions and one absence.

Sen. Luis Crisostimo (Ind-Saipan) voted “no,” while Senate Vice President Jude Hofschneider (R-Tinian) and Sen. Juan Ayuyu (Ind-Rota) abstained. Sen. Henry San Nicolas (Cov-Saipan) was absent.

The bill’s full title is Senate Bill 17-43, Senate Draft 1, House Substitute 1, SD1, Conference Committee Substitute 2.

During yesterday’s House session, Rep. Ralph Demapan (Cov-Saipan) said the House should now act on the bill that he said is “not a special interest bill but a bill to protect public interest.” Demapan led the three conferees from the House.

Rep. Frank Dela Cruz (R-Saipan) said he wondered why the conference committee did not introduce a resolution to abolish the Fund’s board of trustees if somebody else is doing the board’s job for them.

The retirees’ lawsuit filed in October 2009 says that Merrill Lynch, along with the Fund trustees, provided “bad advice” to the trustees, resulting in the collapse of its stock investments.

They have since asked the Fund to join the lawsuit against Merrill Lynch, to no avail until June 2011 when the Fund filed a counter- complaint against its former investment consultant.

Rep. Ray Palacios (Cov-Saipan) said the bill is not about the Fund board.

Ogumoro reiterated her request to call in Fund officials first before acting on the bill.

But Rep. Tony Sablan (R-Saipan) said that lawmakers have already heard enough from the Fund on the issue. He also said the issue is not only about the current board but future boards.

“Let’s pass this bill and send it to the governor,” he said.

Rep. Froilan Tenorio (Cov-Saipan), House minority leader Joseph Deleon Guerrero (R-Saipan), Rep. Ray Basa (Cov-Saipan) and other members also called for action on the bill.

It was not only the Fund board that some lawmakers want abolished, but also the Marianas Visitors Authority board of directors during a discussion on Speaker Eli Cabrera’s (R-Saipan) House Bill 17-209.

The bill seeks to change the composition of the MVA board by reducing the number of governor’s nominees to the board and increase the number of board members chosen by existing MVA members.

Under HB 17-209, the governor will only be allowed to nominate four members instead of the current five members, while MVA members can now choose five instead of only four to become board members.

The bill passed by a vote of 17-2.

Rep. Froilan Tenorio (Cov-Saipan) and Rep. Janet Maratita (Ind-Saipan) voted “no.”

“The best thing we could do about MVA is abolish it. It’s very ineffective,” said Tenorio.

Tenorio, a former governor and speaker, said the House should ask the governor to issue an executive order to reorganize MVA.

“I’m not supporting this bill,” he said.