A three-judge panel for the Oregon Court of Appeals scolded the pension board for investing in an airline hanger development scheme and saying the fund should not reap all the monetary benefits of a fraud lawsuit. With the ruling, the appellate court overturned a Multnomah County judge who had ruled in favor of the retirement fund in its effort to recoup losses associated with the failed aircraft business, according to an Associated Press report.
Yet, the appeals court panel said the county judge erred in awarding about half of those damages. “The judgment affirmed about $34 million of the initial damages,” Kevin Neely, spokesman for Oregon Attorney General Hardy Myers told the Associated Press. “But it’s a mixed ruling it says that about $27 million will no longer be given to [the retirement board].”
The award to the retirement fund was against Michael Reinbold and David Simon, two directors of Pacific Aircraft Maintenance Corp, relating to an early 1990s bond issue by the Port of Portland to help Pacific Aircraft build a large hangar complex for repairing and remodeling planes.
Even though the Portland company agreed to build the hanger complex, it went broke just months after it opened for business and eventually defaulted on the bonds, leaving the pension fund to pay them off. Multnomah County Circuit Judge William Keys, in awarding Oregon $50 million, chided the state, saying it should have researched the investment more thoroughly. Keys said he was siding with the state only because of existing case law.
In the most recent case, the appeals court said because Keys in his ruling found that the state’s reliance on the developers’ claims was “foolish, unreasonable and unjustified,” he was wrong to award damages to the state.
The state is reviewing the judgment to decide what to do next, Neely said.