Differing views on bankruptcy filing

Posted on Apr 17 2012

While Gov. Benigno R. Fitial’s administration said it “understands” and “supports” the NMI Retirement Fund’s filing for Chapter 11 bankruptcy, some lawmakers were not as sympathetic about it. Some lawmakers also said the Fund had no other choice because the Executive Branch and the Legislature “failed” to do more.

“Given his experiences in the banking industry, Gov. Fitial expressed his understanding to the trustees and assured them that he will continue to work closely with the Fund to come up with the most effective re-organization plan for the Fund’s liabilities,” press secretary Angel Demapan said.

He said Fitial and the Fund board “will hold another follow-up meeting once the district court responds to the Fund’s filing of this case.”

After Fund officials led by board chair Bernadita Palacios and counsels Viola Alepuyo and Jeremy Coffey met with the governor yesterday, they also met with lawmakers in the House chamber and called for a news briefing about it.

Fund officials first explained to lawmakers that a Chapter 11 bankruptcy filing is meant only to restructure the pension agency’s financial obligations, which Fund officials said is a lot better than receivership or liquidation of assets.

The ensuing question-and-answer, however, quickly turned into a heated argument among lawmakers.

Senate floor leader Pete Reyes (R-Saipan) said the Fund had to file for Chapter 11 bankruptcy because the Legislature “failed miserably” to help save the Fund for months and years. He said this is a “crisis legislature” because lawmakers only act and work together only when there is already a crisis.

Sen. Juan Ayuyu (Ind-Rota) told Reyes not to blame current lawmakers because the Fund’s problems started many years back during previous administrations and legislatures.

“Senator Reyes had been a member of the Legislature for many years,” said Ayuyu, a freshman senator.

Sen. Jovita Taimanao (Ind-Rota), who has been heading special committees addressing Fund issues, said the Chapter 11 bankruptcy filing was a “sudden decision” that caught lawmakers by surprise. She said she wished the Fund brought this plan up with lawmakers, who have formed joint Senate-House committees to try to prolong the Fund’s life expectancy.

Taimanao said the court gave the government to come up with a plan by June 15. “I still have faith in the Legislature… But I guess it’s too late now,” she said.

Alepuyo reiterated Palacios’ message to House Speaker Eli Cabrera (R-Saipan) that the Chapter 11 bankruptcy filing does not prevent the Legislature from continuing to pursue such efforts to help the Fund.

“Hopefully we’ll be out [of bankruptcy] in six months. It’s like in ICU [intensive care unit]. [The Fund is] sick but we want to get out of there. I’m hoping you’ll be motivated to do it faster,” she told lawmakers.

At this point, Reyes talked about a “crisis Legislature” and the heated discussion ensued.

Later, Fund officials told lawmakers they had to leave because of a 3pm news briefing they had scheduled.

Rep. Joseph Palacios (R-Saipan) said it’s “shocking for all of us” to learn that the Fund filed for Chapter 11 bankruptcy in court, and yet Fund officials wanted to leave in hurry without fully discussing the matter with lawmakers. He said the Fund made the filing “without consultation” with the Legislature.

\Reyes again said this was because the Legislature “miserably failed.”

Senate President Paul Manglona (Ind-Rota), who was listening in to the proceedings, later said it’s “very unfortunate” that the Fund board had to decide to file for bankruptcy. He said he’s also “extremely surprised” about the court filing.

“The board of trustees, whose members are appointed by the governor, concluded that they no longer trust Governor Fitial. Now they’re turning to the third branch of government, the court, to do something. They’re basically putting their hands up. The House is also sitting on Senate bills and initiatives that would have helped the Fund,” Manglona said.

House Speaker Eli Cabrera (R-Saipan) said the Senate bills and initiatives are being reviewed, and based on what he heard from members, many of these proposals would only create more problems for the Fund rather than help it.

The Fund, through board chair Palacios, told the House speaker in a two-page letter yesterday that the Fund looks forward to continued positive dialogue regarding solutions to the pension agency’s problems.

“We are encouraged by the tools that Chapter 11 offers to the Fund and along with your support, believe we can create a positive result for the Fund’s participants. The board is hereby respectfully requesting an opportunity to work with your office to plan and effectuate a re-organization of the Fund’s liabilities to ensure its success in being fully funded,” she said.

Disclaimer: Comments are moderated. They will not appear immediately or even on the same day. Comments should be related to the topic. Off-topic comments would be deleted. Profanities are not allowed. Comments that are potentially libelous, inflammatory, or slanderous would be deleted.