Senate poised to repeal derivative act today

The Senate is poised to pass as early as today a new bill repealing a controversial law allowing NMI Retirement Fund beneficiaries to sue on behalf of the pension program if the board refuses to bring such legal action, senators said yesterday.

Sen. Juan Ayuyu (Ind-Rota), one of two senators who abstained from voting on Aug. 3 on a conference committee bill that later became law, said there is no reason why the derivative lawsuit law should remain when the Fund is already sueing Merrill Lynch.

“That’s the whole intent of the derivative lawsuit bill in the beginning, for the Fund to sue Merrill Lynch. Now that the Fund has sued them, there’s no need for that law,” Ayuyu said in an interview.

Besides Ayuyu, Senate Vice President Jude Hoschneider (R-Tinian) also abstained from voting on the conference committee bill, while Sen. Luis Crisostimo (Ind-Saipan) voted “no” and Sen. Henry San Nicolas (Cov-Saipan) was absent. The five other senators voted “yes,” including the author of the original bill, Senate floor leader Pete Reyes (R-Saipan).

Ayuyu and Hofschneider are co-authors of the repealer bill pre-filed yesterday, but a copy of the bill was not available as of press time.

Senate President Paul Manglona (Ind-Rota) and Ayuyu said the bill will be taken up during today’s session.

Ayuyu said he expects the repealer bill to have the votes to pass the Senate, while Manglona said the bill has merits but it will be up to the individual senators to vote “yes” or “no.”

Ayuyu said that Fund board members and some retirees have been appealing to senators to repeal the one-month-old law that he blames for causing the Fund’s money managers to pull out.

He also said that by entering into new contracts with money managers, it will be more costly to the Fund.

“Third, the Retirement Fund already filed a lawsuit against Merrill Lynch. We should not put more obstacles or put liability on the Fund,” Ayuyu added.

House floor leader George Camacho (Ind-Saipan), in a separate interview yesterday, said he’s happy that the Senate “feels the same way I do that the derivative lawsuit law has to be repealed.”

Camacho introduced a similar bill to repeal the derivative lawsuit law in September but the bill has yet to be reported out by the House Committee on Judiciary and Government Operations.

The House floor leader said if the Senate passes the Senate bill today, then the House may be able to act on it at its next session, tentatively set for Thursday.

The Fund’s board of trustees approved last week the immediate liquidation of its assets, temporarily investing them in mutual funds, and eventually securing them in insured banks to protect them from market fluctuations because of the recent loss of the Fund’s investment consultant, Wilshire Associates.

As of Oct. 11, the Fund’s total portfolio had a market value of $264.29 million.

Pursuant to law, the Fund cannot invest its assets without the advice of an expert such as Wilshire Associates. An emergency request for proposal for Wilshire’s replacement has since been ordered.

The Fund’s money managers have been fleeing the Fund in droves since the passage of the Beneficiaries Derivative Act early last month.