Beneficiary derivative bill signed into law

As acting governor on Monday, Lt. Gov. Eloy S. Inos signed into law the controversial beneficiary derivative bill that has been bouncing in the Legislature since September 2010 and has drawn the battle lines between the NMI Retirement Fund and some retirees and their lawyers suing Merrill Lynch.

“While the opposing comments received raised some meritorious concerns, the measure as passed places sufficient safeguards to address those,” Inos said in his message to Senate President Paul Manglona (Ind-Rota) and House Speaker Eli Cabrera (R-Saipan).

The Retirement Fund Beneficiary Derivative Lawsuit Act of 2011 is now Public Law 17-51.

The bill, introduced by Senate floor leader Pete Reyes (R-Saipan) and Sen. Jovita Taimanao (Ind-Rota), expands shareholder derivative actions to the Retirement Fund so that beneficiaries can sue on behalf of the Fund when its board of trustees refuses to do so.

Inos said the legislation requires the beneficiary to first ask the board to take action when he/she believes the Fund has been injured.

The measure also requires the beneficiary to give the board time to decide whether to act or not to act, and has measures in place to prevent frivolous claims.

“Contrary to NMIRF’s position, numbers of litigations and cost of doing business is unlikely to rise as a result of this measure,” Inos told the presiding officers of the Legislature.

Reyes, co-author of the bill, said yesterday he’s grateful to Inos for signing the bill.

Inos said the Fund’s portfolio has reached a point wherein members of the Fund have become gravely concerned about its longevity and should be allowed to pursue action “where there is clear evidence to support his/her cause of action against those entrusted to properly invest monies on their behalf.”

“This is especially true when the NMIRF’s board of trustees refuse[s] to act on the members’ best interest,” Inos said.

He also noted that the bill is “controversial,” citing the amendments, debates, deliberations, and public concerns that came with it.

“Much discussions and deliberations were considered and weighed on the administration’s part as well in approving this bill,” Inos said.

Mario Taitano, one of the retirees strongly supporting the bill’s passage, said yesterday he’s “relieved” that the bill is now law.

“Now attorney [Mike] Dotts can proceed with the lawsuit against Merrill Lynch. Hopefully, the Retirement Fund board can sit down with us retirees in filing the lawsuit together instead of having two separate lawsuits for the benefit of the entire membership of the retirement plan,” Taitano told Saipan Tribune.

Taitano said retirees can now file a lawsuit against the Retirement Fund’s company or independent contractor doing business with the Fund if the Fund fails to do so when there are questionable acts committed by the contractor.

He cited as an example the Fund’s delayed decision to sue the contractor for a defective pension software that’s supposed to upgrade the system, and the Fund’s former investment consultant Merrill Lynch.

The Fund’s board of trustees remains opposed to the measure.