Administration August 9, 2003

New Mexico Seeks $80M From WorldCom/MCI

September 8, 2003 (PLANSPONSOR.com) - The New Mexico attorney general's office has filed three lawsuits against WorldCom Inc. and its executives seeking about $80 million lost by three state agencies including two pension funds that invested in WorldCom.
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According to an Associated Press report, the most recent lawsuit claims misleading advice from 14 named WorldCom executives, their banks and underwriters led the State Investment Council, the Educational Retirement Board and the Public Employees Retirement Association to lose more than $40 million in bonds and a similar amount in WorldCom stock.

More than 12 other states plan to file similar lawsuits against WorldCom, which renamed itself MCI in the aftermath of a massive accounting fraud exposed last summer, according to the AP report.

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As for New Mexico’s latest lawsuit, Assistant Attorney General Zachary Shandler described it as more aggressive. He said it has a better chance of recovering more money than the previous two that were filed in federal court in New York.

The attorney general’s office has submitted proof of claims for the three state agencies in the federal bankruptcy court where WorldCom filed for bankruptcy protection in 2002.   New Mexico officials expect the WorldCom executives named in the latest suit to seek mediation. If that happens, the case would be moved to federal court in New York. If it isn’t resolved through mediation, Shandler said the case would be sent back to district court in Santa Fe.

The company took a step toward clearing its financial name Monday as a bankruptcy court opened hearings on a plan to erase most of the long-distance carrier’s $41-billion debt.

Administration August 8, 2003

Japanese Retirement Programs Showing Signs of "Age"

August 20, 2002 (PLANSPONSOR.com) - Japanese employee pension funds had 4.5 trillion yen in unfunded pension liabilities for the year ending March 31, according to a new study.
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A Nomura Securities Co. survey of 257 major companies found that the companies needed to offset the unfunded liability with about 30% of their combined operating profit, according to a Dow Jones news report, which quoted the Nikkei Financial Daily.

According to the survey, employee pension funds held about 58 trillion yen in assets at the end of March. With tax-qualified pensions added in, the figure climbed to about 80 trillion yen.

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Unable to shoulder the burden, an increasing number of companies may scale back their employee pension funds, the story said.

Indeed, 401(k)-style, defined-contribution pensions that do not require companies to offset shortfalls are becoming increasingly popular, as shown by the 134 companies that implemented such programs between last October and this July, according to the Dow Jones story.

But a majority of small and midsize companies do not have alternatives to offer, such as defined-contribution pensions. As a result, many are simply opting out of employee pension programs.

That indirectly is leading to investment managers taking a financial hit, according to the Dow Jones story. If employee pension programs continue to decrease, the earnings of investment trust and investment advisory companies will likewise go down.


 

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