A statement on the Web site of Connecticut state Attorney General Richard Blumenthal said that the investment firm had likewise agreed to pay the state pension fund $1.2 million to cover legal expenses.
In July, a Connecticut state court jury found that Forstmann Little had violated its contract with the state pension system by investing in two troubled telecommunications companies, losing some $125 million in state pension funds. But the jury declined to award damages to the state because it found that Forstmann Little had acted on the advice of counsel and that the state treasurer’s office had either ratified or acquiesced to the investment decisions (See CT Jury Awards No Damages to Pension Fund ).
In the state’s settlement announcement Blumenthal and Treasurer Denise Nappier said the case and the jury verdict underscore the importance of private equity firms only selecting those investments that are consistent with the investment approach agreed to at the time investors commit capital to a firm.
The officials said it had taken more than two months of negotiations to work out the deal.
Nappier also noted that the state’s pension fund continues to use Forstmann Little as a money manager.”Notwithstanding the unfortunate conduct in this instance, the firm is among the giants in the industry, and well poised to provide the pension fund with a good return on those investments we are obligated to see through,” said Nappier, noting that the fund has received more than $51.3 million in cash distributions from Forstmann Little investments.