Repeal of derivative suit law heads to Fitial

By a vote of 18-1 with one abstention, the House of Representatives passed yesterday a Senate bill repealing a four-month-old law allowing NMI Retirement Fund beneficiaries to sue on behalf of the pension agency if the board of trustees refuses to bring such legal action.

Rep. Froilan Tenorio (Cov-Saipan) said he voted “no” mainly because the bill is from the Senate. Tenorio had said the Senate rejects or ignores his bills only because he authored those bills. Rep. Stanley Torres (Ind-Saipan), meanwhile, abstained from voting.

Senate Bill 17-94, Senate Draft 1 now heads to Gov. Benigno R. Fitial for action.

The law that SB 17-94, SD1 seeks to repeal is Public Law 17-51 or the Beneficiary Derivative Lawsuit Act that then acting governor Eloy S. Inos signed in September.

The House’s passage of the repealer bill yesterday also came five months after the House passed by a vote of 15-4 the conference committee bill that became the derivative lawsuit law.

Sixto Igisomar, chair of the Fund board of trustees, said yesterday he’s “very happy” that the House passed the Senate repealer bill and hopes that the governor will immediately sign it into law.

Igisomar, present at the House session yesterday, said once the law is repealed, the Fund will be able to grow its investments and hopefully bring back former investment consultant and money managers.

PL 17-51 allows retirees to take legal action on behalf of trusts or the Fund when the trustees who manage them refuse to bring such actions.

Many of the Fund’s service providers-including investment consultant Wilshire Associates, actuarial consultant Buck Consultants and majority of the money managers that handle the Fund’s assets and portfolio-terminated their contracts with the Fund when the bill they felt had a negative impact on the pension agency was signed into law.

Igisomar said he’s thankful for the Senate and the House for initiating a repeal of the law.

“It’s not easy, that’s why we’re thankful for the Legislature and the Governor’s Office,” he said.

Igisomar said the initial $80 million in negative financial impact of the law may be greater because of opportunities lost in the investment market. He believes the adverse effect is greater now because of the opportunities lost in the investment market.

Since the Fund’s investment consultant severed ties with the pension agency last year, the board has been liquidating the Fund’s assets and putting the cash under the certificate of deposit account registry service, or CDARS program.

As of Dec. 27, 2011, some $90 million of the agency’s $256.7 million assets has already been transferred to the program. The board’s goal is to put all of its funds in the program until a new investment consultant is hired.

The original bill that became the derivative lawsuit law was a Senate bill. But both the House and Senate initiated bills to repeal the law.

The Senate had asked the House to allow for the passage of the Senate version instead. The Senate’s wish was granted when the House passed the Senate bill yesterday, despite the release of a committee report that had already recommended passage of the House bill.

House Floor Leader George Camacho (Ind-Saipan), author of the House repealer bill, said it doesn’t matter whether the repealer bill came from the House or the Senate. What matters most, he said, is that something will be done to help reverse the law’s negative impacts on the Fund.

“The point is money managers left because of PL 17-51. We need to bring back the integrity of the Retirement Fund and try to mend the relationship with money managers. Right now, Fund money is sitting in trust funds and we know how much return they’re getting-almost nothing,” he said.

Senate Vice President Jude Hofschneider (R-Tinian), one of the co-authors of the Senate repealer bill, said yesterday that the passage of the repealer measure is a step in the right direction to “help stabilize the Fund.”

SB 17-94, SD1 was among the 23 bills and resolutions that were passed, introduced, rejected or recalled during the House’s first session in 2012 yesterday.

House members introduced 20 bills, local bills and resolutions yesterday. Five of the resolutions were adopted.

House members also recalled their previous action rejecting an expungement bill by a vote of 18-2.