World spotlight on bankruptcy filing

The CNMI gained national press attention for having the first public pension agency on U.S. soil to seek bankruptcy protection, serving as a litmus test for other troubled pension agencies across the globe.

The NMI Retirement Fund filed for Chapter 11 bankruptcy on April 17.

Some national and regional media spoke of the CNMI’s desperate situation, saying the government is now even considering leasing portions of Pagan Island where tsunami debris from Japan could be disposed of and recycled.

Although some news outlets inaccurately place the CNMI as somewhere in the South Pacific—instead of the Western Pacific where the Marianas Trench is—the attention they have been giving this U.S. territory is enough for other pension agencies across the globe to take notice.

The Wall Street Journal, Forbes Magazine, Chicago Tribune and other national and regional news organizations have covered the CNMI’s ill-fated Retirement Fund for days and weeks.

“The Northern Mariana Islands, a U.S. territory in the Pacific Ocean, managed to recover from brutal World War II battles, but its public pension fund could not recover from the financial crisis. The islands’ retirement system is the first U.S. public pension fund to seek bankruptcy protection,” wrote the Wall Street Journal.

Since the NMI Retirement Fund’s filing of Chapter 11 bankruptcy on April 17, the CNMI government has yet to collectively lessen the retirees and active members’ concerns, although Gov. Benigno R. Fitial is now looking to the U.S. Social Security Administration for help and the Senate is proposing the creation of yet another body to review and recommend solutions to the pension agency crisis.

The Fitial administration is also “in support of withdrawing the bankruptcy petition,” press secretary Angel Demapan said yesterday.

The U.S. Trustee for the District of the CNMI filed a motion Friday for the bankruptcy case to be dismissed.

Some news outlets said the CNMI situation could have wide-ranging implications and could trigger a wave of bankruptcies among public pension agencies.

“It’s a high-profile milestone out of a not-so-high-profile place,” Newser wrote. “The Northern Mariana Islands’ public pension fund sought bankruptcy protection last month, a notable move in that it’s the first such U.S. fund to do so.”

In a nutshell, the CNMI government had not paid enough money into the Retirement Fund yet burdened it with costly pension perks, including providing benefits to the surviving spouses of deceased retirees. It also allegedly obtained bad investment advice from its adviser, Bank of America Corp.’s Merrill Lynch, running the pension agency to the ground.

“It’s giving us a big black eye,” Senate President Paul Manglona (Ind-Rota) said yesterday, referring to the national media coverage that the CNMI is getting. He said it is “very sad and unfortunate” that the CNMI is in the limelight because of a crisis and not for a success story.

“As I always stated before, I wish the governor and the Legislature could work together to help the Fund. The mere filing of the bankruptcy shows the Fund board’s loss of confidence in the governor’s leadership to do something about the situation,” Manglona said.

The Fitial administration said it is doing something to help the Fund.

“The governor and lieutenant governor have been in communication with SSA officials in an effort to discuss possible solutions relative to salvaging the pension program in the CNMI,” the press secretary said.

Former representative and lieutenant governor Diego Benavente, a director of the Commonwealth Retirees Association, said the national attention that the CNMI has been getting “shows how serious the problem is.”

“It’s definitely alarming. This kind of media coverage is not welcome but it should wake up everybody who has the ability and the power to do everything to help,” he said.

Forbes Magazine wrote, “What’s happening in Northern Mariana Islands is no isolated phenomena. Merrill Lynch and the lead plaintiffs in a class action involving about 70 municipal pension plans in Florida together filed a proposed settlement recently seeking to end a dispute over whether the wirehouse breached its fiduciary duties as the investment consultant to these pensions.”