Fund board questions legitimacy of beneficiaries derivative law

The NMI Retirement Fund’s board of trustees is questioning the validity of the newly signed Public Law 17-51 and will be sending a letter to the Fitial administration to ask for details relating to the approval of the measure.

As of 8:30pm last night, the trustees were still in an executive session, debating whether or not to challenge the law in court. The emergency meeting began around 4pm.

Public Law 17-51, which allows retirees and other Fund beneficiaries to sue on behalf of the NMI Retirement Fund, was signed by Lt. Gov. Eloy S. Inos, with a Sept. 5 date on the transmittal letter. Sept. 5 was Labor Day, a holiday. Gov. Benigno R. Fitial, who had earlier promised not to sign the bill, had until Sept. 24 to act on it.

Because of concerns whether the law is valid or not, board counsel Viola Alepuyo was instructed to call and verify the exact date when the document was processed.

“What we can actually state now is the fact that transmission of the document was not made public until Tuesday. Whether it was signed Monday [which is a holiday] or Tuesday, we don’t know. .We will be sending a letter to the administration to inquire on those issues and the validity of the signature on the said public law whether it was legitimate or not,” said board chair Sixto Igisomar.

Because Fitial was reportedly back on island Monday night, trustees are concerned that the law might not be valid at all if the bill was actually signed Tuesday morning by the lieutenant governor.

“I understand the fact that there are still too many days left for the bill to be signed [Sept. 24]. Considering Monday was a holiday, the bottom line question here is, why the rush?” Igisomar said.

The bill passed both the House and Senate and was transmitted to the governor on Aug. 16. By law, the governor has 45 days-or until Sept. 24-to act on the bill. In case of a veto, the Legislature has 60 days to override it.

Donna Cruz, a retiree who also spoke at the meeting, also aired concern about the rushed approval of the measure. She asked the board to look into this before making any decision to challenge the law in court.

Contracts terminated

Fund administrator Richard Villagomez told the board that immediately after the law was signed, one of the Fund’s money managers, Stralem & Company, gave a 30-day notice to terminate its contract, citing the negative effects of the new law.

Igisomar also disclosed that the contract for Blackstone Alternative Management will not push through, even though it is ready. The contract has a provision stating that if the beneficiary derivative bill becomes law, the contract will be considered self-terminated. Igisomar said he was about to sign the Blackstone contract on Tuesday when the bill was enacted.

Richmond Capital Management and the Fund’s investment consultant, Wilshire Associates, have also sent feelers, Villagomez said, indicating their desire to terminate their contracts with the Fund for the same reason. He expects the remaining money managers to follow suit.

“We need to plan for this worst-case scenario,” Villagomez said. “Obviously, whether this is valid or not.we’re feeling the effects already.”

The Fund will have a teleconference on Saturday with all its money managers and Wilshire to fully discuss the impact of the law.

Money managers must give a 30-day notice to terminate their contracts; Wilshire can terminate it anytime it wishes to do so.

The Fund disclosed that Wilshire is being paid $195,000 a year for its services. In case it decides to obtain insurance against lawsuits, this would result in $170,000 to $180,000 in additional expense.

It was earlier reported that Wilshire had been asked to stay on, with the condition that the Fund will challenge the new law in court.

Lawyers delay resignation

The board yesterday approved the announcement of two vacancies for attorneys after legal counsel Viola Alepuyo said she and the Fund’s three other counsels, intend to resign. However, she said they delayed submitting their resignation letters at the request of the board.