‘Frozen MPLT $224K investment a very expensive lesson’

The Marianas Public Land Trust’s frozen $224,000 investment in a Russian banking and financial services company is a very expensive lesson for MPLT, according to Sen. Celina R. Babauta (D-Saipan).

This comes soon after it was learned that some $224,000 of MPLT’s money that’s invested with Sberbank of Russia is frozen due to sanctions imposed by the U.S. Department of Treasury as a result of Russia’s invasion of Ukraine.

Babauta asked about the frozen investment during the Senate Committee on Executive Appointments and Government Investigations’ confirmation hearing last Friday for Gov. Arnold I. Palacios’ appointment of former Education commissioner Dr. Rita A. Sablan, former MPLT Trust board chair Alvaro Santos, and Tinian businessman Phillip Mendiola Long, to serve as members of MPLT board.

Babauta chairs the committee.

MPLT trustee chair Vianney B. Hocog disclosed the frozen investment in his administrative report to Palacios last March 1, stating that this was the result of sanctions imposed by the U.S. Department of Treasury’s Office of Foreign Asset Control against Russia.

Celina R. Babauta and Alvaro Santos

Babauta said she understands that it was MPLT’s non-U.S. equity manager, WCM Investment Management LLC’s decision to invest with Sherbank, but that she could not see how MPLT trustees did not know about such investment. Babauta said they should call an informal meeting with MPLT trustees to be informed about the situation.

Sablan said if they are confirmed they can return and give an update to the EAGI Committee.

Sablan said the frozen investment was a huge surprise to everyone, even herself. “This is a lesson learned for all of us,” she said.

Babauta replied “it’s a very expensive lesson.”

Santos said that WCM, as MPLT’s discretionary manager, is someone that is entrusted with the investment without the investor getting involved in buying or selling.

Santos said his initial reaction after reading about it in the newspaper was that the war in Ukraine started a year ago and it was followed by the U.S. sanctions imposed on Russia. He said WCM should have seen the red flag and should have immediately considered selling or pulling out the money.

Santos said he has no answer as to why WCM decided to stick with the investment until it was frozen.

MPLT trustee chair Hocog disclosed that frozen are $198,000 and $26,408 for the MPLT’s investment portfolio in the General Fund and American Memorial Park Fund accounts, respectively. Hocog said these securities are continuously being monitored by Raymond James, MPLT’s investment consultant.

He said WCM notified MPLT last month of a sanctioned security that was purchased by WCM in the MPLT’s General Fund and Park Fund accounts.

WCM operations manager Julianna Jones said that, due to the ongoing conflict between Russia and Ukraine, the U.S. Department of Treasury Office of Foreign Asset Control implemented sanctions on key sectors of Russia’s economy, including Sberbank of Russia.