Rebuttal to attack on Fund trustees: Jumping to erroneous conclusions

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Posted on Apr 21 2009
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[I][B]Conclusion[/B][/I]

The political season being what it is, I do feel that the Fund’s board of trustees have been done an injustice as a result of comments which appeared in a recent Letter to the Editor published in this paper (Friday, April 17), titled: “The insolvency of the NMI Retirement Fund.”

The comments which follow are offered as a clarification and an independent assessment of several issues that appeared in the above letter as considered from the point of view of an economist and one who has not been asked to reply on behalf of, or in defense of, the Fund’s trustees.

Being a member I am interested in the long-term financial viability of the Fund and submit my opinion of the stewardship of Fund’s operation in contrast to that of the writer of the above letter. In the vein of Nehru’s observation, “it is right that we should encourage honest criticism and have as much public discussion of our problems as possible.”

The various published accusations leveled at the Fund’s trustees and my personal response to each follows—all of which are independent of Fund encouragement, endorsement or sanction. I alone bear the responsibility for the accuracy my comments and opinions.

Accusation or Question: “Why wasn’t this step undertaken (i.e., liquidate the Fund’s investment portfolio) in the interest of protecting retirees and members? Was it too difficult an undertaking, therefore trustees had to engage in the baseless and useless blame game to cover its incompetence? Why can’t trustees admit that they are equally a part of the problem in the Fund’s financial debacle? You seem to be running out of excuses in your bag of tricks, right?”

Response: Wrong. The record is filled with Fund attempts to protect the assets and property rights of the Fund and its members, the most recent action being the filing of a lawsuit against the government.

If the Fund’s trustees, past and present, were so inept, why didn’t the central government bring suit against the board rather than vice versa—of which the members in the final analysis were appointed by the various government administrations?

The Fund listed 10 causes of actions against the government. These are as follows:

Breach of the December 2001 contract, which commits the central government to pay $500,000 biweekly to the Fund;

n Breach of contractual agreement between the CNMI government and its employees who are members of the Fund and with its annuitants;

n Enactment of Public Law 15-15, suspending the employer contribution up to the end of Fiscal Year 2007, which is “unconstitutional because it diminishes or impairs the accrued benefits of the Fund”;

n Violation of the contract clause of the CNMI Constitution, which prohibits the enactment of laws that impair the obligations of contract;

Violation of 1 CMC Section 8362 by failing to remit the statutorily required employer contribution to the Fund amounting to $91.5 million as of date of filing (Aug. 1, 2006);

n Violation of 1 CMC 2553 for failure to remit statutorily required employer contributions;

n Violation of P.L. 8-31, which requires the government since Fiscal Year 1994 to allot or pay the Fund 30 percent of the container excise tax and 20 percent of the hotel occupancy tax in part to fund the members’ group health and life insurance program, the cost of living allowance, and for the sound actuarial support of the retirement system, now totaling $24 million;

n Violation of P.L. 8-30, which requires the government to remit the money intended for the early retirement bonus of qualified members, amounting to $3.5 million;

n Failure to remit payment for the special benefits for past governors and lieutenant governors as embodied in P.L. 8-31, amounting to $445,603;

n The need for issuance of a writ of mandamus “to compel the Department of Finance and DOF director to perform their ministerial duties or obligations of remitting payments to the Fund.”

The Fund has made numerous demands for payment to the governor, the DOF, and the director, to no avail,” according to the lawsuit.

Accusation or Question: ”Trustees wanted the administration to cough up what’s owed in employer’s contribution. But isn’t it true that forcing the issue simply means including taxes paid into the local coffers by the private sector and their employees? Why should they be penalized when they have nothing to do with the Fund nor are they slated to benefit by paying for someone else’s incompetence? Why would you kill Jose so that Juan can live? Please, you have bankrupted the system; let’s veer off private sector taxpayer lawsuits.”

Response: Again, an attempt by the central government to weasel out of its own contract with its own current and former (now retired) employees. From the beginning it has been the government’s promised retirement plan for its employees. It was the government that devised the retirement plan, not the employees.

For many retirees the government’s employer contribution was considered as tantamount to being deferred compensation for service rendered prior to retirement at income levels below what might have been paid within other sectors of the economy either on-island or elsewhere.

Accusation or Statement: “It would also be prudent for the Fund to demonstrate to retirees and members what has it done in the last four years to cut operations expenses of the Fund. Let’s see your annual budget, including salaries for personnel, payments for vendors and who are these vendors, among other things. We deserve to know!”

Response: This is true.

Accusation or Statement: “Finally, if at the end of another imperfect day you can’t resolve issues I have raised herein above, perhaps it’s best you do it Japanese style: Resign! We deserve nothing less than reasoned and competent disposition of the issues at hand. Did someone boasts he’s an expert on solutions? Step up to the plate, sir. I challenge you to resolve this issue with finality!

Response: For those who may be disappointed with the actions of the Fund’s board of trustees, don’t forget all trustees have been appointed by a governor. As far as I can tell they are doing their best to maintain and adhere to their fiduciary responsibilities even if such action runs counter to the wishes of any temporary occupant of the governor’s office. The trustees are well aware that they can be held personally as well as collectively liable for any proven abuse or neglect of their fiduciary duty.

The Fund trustees have stepped up to the plate and await the judicial process “to resolve this issue with finality!” Have a nice day.

[I][B]William H. ‘Bill” Stewart[/B] via e-mail

P.S. Since 2004, I have published more than 50 “op-ed” pieces concerning the deteriorating condition of the member’s retirement security. These articles may be reviewed in the archives of this paper by entering my name in the archives search bar. For economic credentials Google: saipanstewart.com (open on “Home”).[/I]

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