Nebraska High Court Leaves Alone Dismissed Pension Loss Case

December 11, 2006 (PLANSPONSOR.com) - The Nebraska Supreme Court has turned away a request to throw out a lower court ruling dismissing an Omaha attorney's lawsuit that claimed state pension fund officials lost $40 million through an illegal investment.

The state high court agreed with Lancaster County District Judge Paul Merritt Jr., who had thrown out the lawsuit saying, among other things, the case was moot since the state was no longer involved in the investment, according to the Beatrice Daily Sun.

Larry Myers’ 2003 lawsuit alleged the Nebraska Investment Council violated the law by placing $200 million in pension funds with two companies to invest in options, commodities and futures. The council “lost $40 million or more as the direct and proximate result of speculative, illegal and statutorily prohibited investments, including but not limited to” the investments in question, the lawsuit claimed.

The suit asked the court to order the council and the two companies – WG Trading Co. and Westridge Capital Management Inc. – to repay the money lost through the investments.

“The state funds were locked into a vague strategy unresponsive to market conditions, and the state officials had no control over the actual investments made,” wrote attorney H. Daniel Smith in briefs submitted in the case, the news report said.

For their part, state officials argued that the investment’s performance afterward allowed them to recoup the money by the time the accounts were closed.

State Auditor Kate Witek released an audit in 2002 that was critical of the council’s investment decisions. The audit said there was a lack of internal controls and segregation of duties within the council. The law prohibiting such investments has since been changed.

A copy of the opinion is here .

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