NMI Fund Makes National News

May 4, 2012

Add mismanagement of a U.S. public pension plan to the long list of corruption schemes and shameful acts committed or permitted by the CNMI Government that has made the headlines in the national media. Two prominent U.S. publications noted that the Northern Mariana Islands public employee retirement system became the first U.S. public pension fund to seek bankruptcy protection.

A May 3, 2012 The Wall Street Journal article, A First for US Public Pension Fund: Bankruptcy: NORTHERN MARIANA ISLANDS' FUND COULD RUN OUT OF MONEY IN 2 YEARS, described how the author had predicted and even warned of the failure tens years before the collapse. The article portrays the CNMI as a desperate struggling territory. So desperate that, “It's considering allowing Japan to unload tsunami debris on one of its unoccupied islands,” the author writes.

Forbes Magazine also published an article yesterday about the mismanaged fund. The article by Edward Siedle entitled Failure to Heed Early Warnings Led to Failure at Northern Mariana Islands U.S. Pension discussed ten year old kickback schemes and “conflicts of interests from Wall Street stockbrokers posing as pension fund specialists that were undermining pension returns.” He wrote:
According to today’s Wall Street Journal, in October 2009 the retiree participants in the fund filed a lawsuit against Merrill Lynch, the investment adviser to the fund since the 1980s. The lawyer representing the retirees had, at the suggestion of one or more attendees at my speech, spoken with me before the suit was filed. Apparently the pension fund’s board of trustees refused to join the lawsuit, instead blaming government failure to make contributions and over-generous benefits as the real culprits. Let me assure you that while decades of tainted investment advice may not be the sole cause of the demise of the plan, it is, in my opinion, a leading factor. Further, it was no secret, even a decade ago, that the integrity of the plan’s investments had been undermined by adviser conflicts.
Respected economist Bill Stewart has warned of the consequences of the mismanaged NMI retirement fund for decades. He remarked on the Forbes Magazine article stating:
“To those in the NMI who still hold out the false hope that a pension obligation bond will solve the Fund’s problems — read the article below which appeared in one of the most prominent publications available from the American financial sector — if not the entire world. I refer to Forbes Magazine.

Then ask yourself in view of the dismal investment reputation the NMI government has created for itself — why would anyone purchase a POB from such an inept government that can not even pay it's hospital bills or pay debts to creditors resulting from awards adjudicated in it’s own court system? What does it take to wake people up that the POB is not a viable solution?
In a May 4, 2012, letter to the editor Mr. Stewart talked about the current status fund:
The problem with the NMI's defined benefit plan is that the various administrations abandoned the DBP and along with it the promise to the loyal members of the DBP, with the result that the retirees' own government betrayed its own people and made a Ponzi of their retirement plan. The NMI government has intentionally made the DBP to now resemble a Ponzi by cutting the Fund’s base of continuing monetary contributions by encouraging active members to withdraw their money and participant in an entirely inadequate defined contribution plan. (For more on this subject check out http://kixproductions.com/cnmiretiree/)

It need not have happened in the first place and now look at the mess the government created and the legal chaos that currently prevails.
Mr. Stewart has written over 50 letters to the editor warning of the dangerous practices related to the fund. It is unfortunate that his wise words were not heeded.

While the fund was shrinking numerous attorneys and consultants profited and increased their own bank accounts  substantially from fees charged to the fund. The Saipan Tribune reported that in just 4 years the retirement fund spent over $9 million on professional fees, including "actuarial service fees, audit and accounting fees, financial consultant fees, investment management fees, legal service fees, and PCT custodial fees."

The $9 million figure does not even include the fees of Boston bankruptcy attorney Jeremy Coffey who was earning between $475 and  $1,000 an hour or any of the in-house counsels.

The Tribune reported that legal fees alone amounted to $862,631.70. From the Saipan Tribune:
Based on at least January 2010 to February 2012 data that Cruz gathered, the law firm of Camacho & Alepuyo, and later of Viola Alepuyo, the Fund board counsel, was paid over $325,000 in monthly legal fee/invoice.

The range of the monthly legal fee/invoice for the Camacho & Alepuyo law firm, and later to Viola Alepuyo, is from $7,155 to $23,540.

During the same period of January 2010 to February 2012, the Fund also paid for legal services provided by: Deborah E. Fisher, $5,300 in May 2010; Fisher Huesman LLC Trust Account, $15,000 in 2011; and the Law Office of Braddock Huesman, a total of over $46,000.


Capt said...

This is only the tip of the iceberg. It seems "everything" that these elected get into goes South.
This Admin. is particularly incompetent involving more political hires from family and friends that do not have the slightest clue of even how to manage a household.
How many times has this Admin put the NMI and it's people in this kind of degrading lime light.
Granted this has been done over the years by past Admins. and incompetent trustees and and managers and has come to a head now.
Same with ALL of the problems that are coming out now fro m other areas that no one has any clue of how to solve.Only of how to rape the systems.
And Inos is not innocent in any of this either.

When is someone going to attempt to do something and start by at least trying to get rid of Fitial.
If that happens it would at least be a start and would put the rest on notice.
But the other problem is where are the competent people that can replace all of these elected incompetents?

This will truly be interesting when all of the CW leave.
So many profess that the present jobs can be handled without any outside workers.
YES there are many that COULD be handled but our people will not work at those jobs.(especially at the present unsustainable hourly rate)
But there is probably half of the jobs out there that require more than a minimum education.
Most of our people just want to have a do nothing job from the Govt. and collect money, even though it is with reduced hours.

The Saipan Blogger said...

The best way to get rid of all the CWs is to give them green cards.

Anonymous said...

US Immigration officials in charge of this fiasco need to be investigated for gross incompetence. Federal law dictates that after a certain date any guest worker who does not have the required documents will be removed and CW numbers will drop to zero. They have not done this. There are a few thousand foreigners that need to get out now. They are illegals breaking Federal Law. There are American doctors on Saipan who are using their clinic to birth anchor babies from China, Philippines, Korea, Russia and elsewhere. Pass a Federal amendment right now that takes away the instant US Citizenship given out. US Taxpayers have had enough. Millions sent for food stamps for people who should go HOME.

TAGLISH said...

Anon 6:40
"Millions sent for food stamps for people who should go HOME". Are you sure you have millions? And for your information, CWs are not qualified to get food stamps, not a single penny!
Just wait until this school year ends, by next month a lot of CWs will leave this island. Go to the airport and watch them leave! Then, watch how your CHC, CUC, Retirement fund, schools, hotels, stores collapse one by one! And hey! we're watching, too.

Anonymous said...

2:04 am, your are most likely correct.
That is probably why that will never happens as maybe more than 10k from here will go to the US mainland and get into the job market there.
The problem there, besides the high unemployment rate, would be that the highly skilled Technical workers would work for low wages and under the board thus disrupting the "balance" which in fact could cause more unemployment as many of the employers would take advantage of this fact..

Anonymous said...

There aren't many highly skilled professionals left among the worker ranks, as anyone that could get an H-1 already has

Green Cards for All! said...

Anonymous said...

There are American doctors on Saipan who are using their clinic to birth anchor babies from China, Philippines, Korea, Russia and elsewhere. Pass a Federal amendment right now that takes away the instant US Citizenship given out.

This is an “issue” throughout the U.S., from Los Angeles to Miami, and is hardly unique to the CNMI.

By no means is there a national consensus on the need to change the Fourteenth Amendment to address such tactics. If there were, the process requires a 2/3 vote of both the House and Senate, followed by ratification of 3/4 of the states.

This is hardly something that can be done “right now,” and certainly not by making your appeal to do so on this blog, as influential as Wendy's readership may be. (!)

Wendy, I can barely wait to see your book.

Wendy Doromal said...

Hello GCFA

Thanks so much. I need to wean myself away from writing here to spend more time completing my book.

Wendy Doromal said...

Hello GCFA

Thanks so much. I need to wean myself away from writing here to spend more time completing my book.