MOSERS May Sue Over Future Investment Losses, Limit Staff Bonuses

November 21, 2009 (PLANSPONSOR.com) - Trustees of the $6.8 billion Missouri State Retirement System (MOSERS) have voted to consider lawsuits seeking damages if they suffer future investment losses.

 

According to Bloomberg, the MOSERS trustees voted Thursday to solicit reports from law firms about prospects for legal action. 

 “In carrying out its responsibilities to prudently invest and manage the assets of the system, Mosers shall actively monitor the assets for any losses that may have occurred as a result of a violation or potential violation of federal and state securities laws or a breach of any duty owed the system,” the board’s resolution says, according to the report. 

Earlier in the week, Ohio’s Attorney General filed a lawsuit against several ratings agencies, including Standard & Poors, Moody’s and Fitch, on behalf of on behalf of the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, the Ohio Police & Fire Pension Fund, the School Employees Retirement System of Ohio, and the Ohio Public Employees Deferred Compensation Program, for “providing unjustified and inflated ratings of mortgage-backed securities in exchange for lucrative fees from securities issuers” (see Ohio AG Sues Rating Agencies). 

Unprofitable Investments 

The MOSERS decision directs law firms to produce reports regarding the “advisability of seeking damages or compensation from such losses, as well as the chances of success and potential expenses of litigation.”  MOSERS board will hire attorneys to monitor unprofitable investments and to handle cases if litigation is deemed appropriate, after public requests for proposal, the resolution says, according to Bloomberg.

However, “The litigation policy is for going-forward issues, not market losses,” Chris Rackers, spokeswoman for the system, said in an e-mail message to Bloomberg, according to the report.  MOSERS, PLANSPONSOR’s Public Plan Sponsor of the Year in 2008 (see Public Plan Sponsor of the Year: State of Missouri: "Show Me State”) reported a 10.4% gain for the quarter ended September 30, 2009 (See MOSERS Boosted by $600M in Q3). 

Bonus Vote 

In the same meeting the MOSERS board voted 6-4 to direct its staff to draft a new compensation plan prohibiting staff bonuses after a year in which the fund lost money.  According to the Columbia Daily Tribune, the new pay plan also would tie half of the bonus payments to how the staff handled the allocation of the system’s assets. Another board vote will be needed to implement the new bonus plan.  The issue was a sensitive one for many public pension systems earlier this year (see Public Fund Incentives Draw Fire, Focus, MO Governor Unhappy about Retirement System Bonuses).

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