Tennessee Fund Files WorldCom Suit

January 31, 2003 (PLANSPONSOR.com) - The Board of Trustees of the Tennessee Consolidated Retirement System (TCRS) has filed suit in the Chancery Court of Davidson County, Tennessee, to recover some $24 million in losses associated with TCRS's investments in bonds issued by bankrupt WorldCom.

The $23 billion TCRS purchased “investment grade” WorldCom bonds between April 1999 and December 2001. Although TCRS was able to sell its bonds before they became completely worthless, TCRS nonetheless suffered approximately $24 million in losses.

The TCRS lawsuit names the underwriters of the WorldCom bonds purchased by TCRS and WorldCom’s outside accountants as defendants.   The action is the latest pension plan to file suit against Worldcom, including The University of California (see UC Seeks Home Court Advantage in WorldCom Suit ), the state of Ohio (see O hio Will Stay Close to Home With Enron, WorldCom Claims ), as well as Pension systems in California, Illinois, West Virginia, and Alabama (see  Pension systems in California, Illinois, West Virginia, and Alabama ).

False “Hoods”

The TCRS complaint alleges that the registration statements for the bonds that were filed with the Securities and Exchange Commission and financial statements issued by WorldCom contained materially false statements and material omissions that gave investors a false picture of the actual financial condition of the firm, and its ability to repay the bonds. The complaint further alleges that the false statements included:

  • financial results based on inflated asset values,
  • inflated earnings reports,
  • improper classification of assets of companies acquired by WorldCom,
  • improper accounting for debt it could not collect,
  • transfers of operating expenses to capital accounts, and
  • other accounting manipulations.

The Nashville law firm of Branstetter, Kilgore, Stranch and Jennings in association with the national securities litigation law firm of Milberg, Weiss, Bershad, Hynes and Lerach LLP will represent the Board of Trustees.

The Tennessee Consolidated Retirement System has 197,971 active members and 80,426 retirees and beneficiaries receiving benefits as of June 30, 2002. TCRS membership includes teachers, state employees, higher education employees, and local government employees.