Compliance March 12, 2007

Court: Co. Without Employees Not Eligible for Workers' Comp.

March 12, 2007 (PLANSPONSOR.com) - The Wyoming Supreme Court has ruled that officers of companies without employees cannot get access to workers' compensation coverage.
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In a 4-1 ruling involving Outside magazine contract writer Mark Jenkins, the high court upheld a state appellate court decision that, in turn, had upheld a determination by the Wyoming Workers’ Safety and Compensation Division that corporate officers could not obtain coverage when noncorporate officer employees did not exist.

According to the ruling, Jenkins hurt his wrist in October 2004 while on a rock climbing retreat for Outside’s staff and filed a workers’ compensation claim under a policy he purchased two years earlier for a Wyoming corporation he had set up at the suggestion of his tax adviser. The corporation had no employees and the only officers were Jenkins and his wife, the ruling said.   

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The Workers’ Safety and Compensation Division contested the claim but a hearing officer granted Jenkins’ coverage request. The appellate court threw out that decision and the most recent Supreme Court holding agreed.

But Justice Marilyn Kite parted from her colleagues in the majority, saying that underWyoming law Jenkins was entitled to coverage as an officer of a corporation that had purchased workers compensation coverage.

According to the ruling, Jenkins’ argument for coverage under was based upon a “dual capacity” theory where coverage for corporate officers is provided for if the corporation had elected coverage and the corporate officer suffered a work-related injury while acting in the capacity of an employee.  

However the state, the appellate court and the Supreme Court argued that the coverage is available for corporate officers only if the corporation employs individuals other than a corporate officer and the corporation elected coverage for its officers.

The full ruling in  Mark Jenkins vs. State of Wyoming is  here .

Administration March 10, 2007

CalPERS/CalSTRS Reach Settlement With WorldCom

October 27, 2005 (PLANSPONSOR.com) - California's public pension funds announced they will receive over $250 million in a settlement of a lawsuit against former WorldCom executives and several investment banks.
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In a press release it was revealed that the California Public Employees Retirement System (CalPERS) is expected to recover more than $200 million, while the California State Teachers’ Retirement System (CalSTRS) will recover $38.7 million and the Los Angeles County Employees’ Retirement Association (LACERA) will recover $18.7 million.

According to a FOX News report this is just part of a $651 million settlement reached for a group of 68 state and local retirement funds for states including California and Illinois.   Like New York’s public pension funds, CalPERS, CalSTRS, and the others believed their own suit would get them a better deal than participating in the class-action suit against WorldCom and the banks (See  NYC Public Pension Funds Reach Settlement in WorldCom Suit ).   The class action suit was settled for $6.1 billion to be spread among 830,000 institutions and individual investors (See  Hevesi Settles with Last WorldCom Defendants ).   According to the office of William Lerach, lead attorney for the 68 plaintiffs in the CalPERS case, the $651 million represents an 83% premium above what the funds would have received in the class action settlement, FOX News said.

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The lawsuit, filed in July 2002, among other allegations accused investment bankers of failing to do adequate due diligence before underwriting $12 billion worth of bonds for WorldCom issued in May 2001, the CalPERS press release noted.   The defendants included J.P. Morgan Chase & Co., Deutsche Bank, Salomon Smith Barney, and Bank of America, ABN Amro and four other foreign banks, lead underwriters in the 2001 bond sale, as well as WorldCom’s accounting firm, Arthur Andersen LLP.

Under the settlement, Citigroup and J.P. Morgan also agreed to support a proposed market reform initiative, CalPERS said in the release.   They, together with CalPERS, CalSTRS, LACERA, and other institutional plaintiffs, will jointly petition the US Securities and Exchange Commission to issue rules requiring more disclosure in future securities offers, including more information about loans to issuers and the issuers’ officers, increased information about allocation of IPO shares to the issuers’ insiders, and greater transparency about research coverage underwriters provide about issuers.

On top of the $651 million, FOX News reports that Lerach expects to gain additional funds from the disgorgements paid by former WorldCom Chief Executive Bernie Ebbers and former Chief Financial Officer Scott Sullivan, both of whom were sentenced to federal prison and heavily fined for their roles in the accounting scandal.

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