Fitial said to assure Fund he will veto derivative act bill

Gov. Benigno R. Fitial has assured the NMI Retirement Fund that he will veto the beneficiary derivative bill that was passed by the Legislature last week and is now sitting on his table.

Fund board chair Sixto Igisomar disclosed this during yesterday’s Fund board meeting, saying he met Fitial before the governor left for a trip to Alaska and he reiterated the Fund’s opposition to the measure.

“He [Fitial] assured the Fund that he will not approve it,” Igisomar told his colleagues.

Senate Bill 17-43, or the Beneficiary Derivative Act, seeks to allow retirees to take legal action on behalf of trusts or the Fund when the trustees who manage them refuse to bring such actions. The measure passed the Legislature 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. If he vetoes it, the Legislature has 60 days—or until Nov. 24—to override the veto.

During a lengthy discussion on the issue, Fund trustees expressed disappointment with the action of legislators.

Adelina Roberto said she was shocked to learn that the Legislature had passed the bill. “I was shocked. Proponents of the bill are the very same people who said that they’re not going to approve it,” she told the board, adding that the main proponent of the bill, Sen. Pete Reyes (R-Saipan), informed her that it was the desire of CNMI retirees.

Fund administrator Richard Villagomez pointed out, though, that the Commonwealth Retirees Association headed by Juan Sablan represents only a small portion of the retiring population in the Commonwealth.

It was learned yesterday that prior to the bill’s passage, lawmakers had told Fund members that the passage of the measure will depend on the decision of trustees whether or not to sue its former investment consultant, Merrill Lynch.

Igisomar denied that the Fund was forced to sue Merrill Lynch because of a “compromise deal” with the Legislature not to pass the derivative measure.

“We already filed the case. We haven’t settled it and it’s in litigation and I cannot provide any more comment. But what I can say now, we filed the lawsuit with merits and we have reason to,” he told Saipan Tribune during a break in their meeting.

The Fund had earlier refused to join the lawsuit against Merrill Lynch pending the completion of the fiduciary audit it commissioned.

“We never said that we will never sue Merrill Lynch. We said [in the past] that it’s our decision to make and we’re not ready to file then. Now, we’re ready,” said Igisomar.

He said a series of public hearing on the derivative measure should have been held prior to any decision by legislators.

“Such a decision with such magnitude should be discussed openly for a proper decision making,” he said. “Respectfully, I know legislators have a lot to handle. I know their role and that is do what they feel is best. They voted and they passed it. On our end, we still respectfully disagree with it.”

Viola Alepuyo, the fund’s legal counsel, reported yesterday that investment consultant Wilshire Associates has reiterated its opposition to the bill and expressed its desire to reconsider its contract with the Fund. The Fund hired Wilshire only in October 2010, replacing Merrill Lynch.

Alepuyo said the bill is hindering the processing of the contracts of 10 money managers it recently hired. These contractors have described the bill as “anti-business” and, if passed into law, would be the only one in existence throughout the U.S.

According to Alepuyo, Wilshire’s legal counsel is now reviewing the bill and will soon provide its formal position to the Fund, which the trustees agreed to share with the Executive Branch.

“They advised the Fund that if this passed into law, they will reconsider their relationship with the Fund. They expressed concern that they are uncomfortable working with a client who changes the rule in the middle of the game,” added Alepuyo.