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By Katie Worth

HAGÅTÑA, Guam (Pacific Daily News, Mar. 16) - Some Government of Guam Retirement Fund money managers who were on board when the fund lost a quarter $250 million - including at least $6 million in Enron stock - have since been cited by federal regulators for alleged wrongdoing in a national investigation.

The settlements that resulted from the U.S. Securities and Exchange Commission citations may allow the financially strained Retirement Fund to recover some of those lost funds.

Retirement Fund board Chairman Joe T. San Agustin said some of the Retirement Fund money managers who have settled with the SEC have set aside millions of dollars to repay clients nationwide whose accounts were allegedly mismanaged.

The Retirement Fund recently issued a Request for Proposals for law firms to investigate the issue and possibly pursue claims against firms who may have been responsible. The GovGuam Retirement Fund has yet to find out which specific fund managers were responsible for the losses specific to the GovGuam Retirement Fund investments.

The matter is important to pursue for the GovGuam Retirement Fund because thousands of current and future government of Guam retirees’ livelihoods depend on the fund's solvency, San Agustin said.

"We felt we have to go after this," he said. "We’re talking about a $1.2 billion asset that has not substantially grown in the last five or six years. That’s a major concern."

A $4 million return on a $1.2 billion investment translates to a 0.33 percent gain. Investment Web sites state that the average annual return on stock investments from 1926 to present has been just more than 10 percent gains.

Three proposals have been submitted, but no contract has been awarded, said Retirement Fund board member and former Senator Tony Blaz.

The Retirement Fund will not pay the law firm directly, but the firm would receive a portion of any recovered money, San Agustin said.

Further, it appears that some of the Retirement Fund’s 11 fund managers may have failed to follow local law as well, San Agustin said.

He said a law prohibits Retirement Fund money from being invested in companies that are not producing dividends at the time of the investment. However, he said, many times that didn’t happen.

In fact, at least $1.4 million was invested in Enron stock in November 2001, when the company was already beginning its famous fall, according to a February 2002 Pacific Daily News story.

Though the shaky stock market has long been blamed for the Retirement Fund’s colossal losses in the late 1990s and early 2000s, Retirement Fund board members said they have unearthed information that indicates there may have been more at work than the normal fluctuations of the market.

Board member Blaz said the losses to the $1.2 billion fund are unacceptable, especially considering that the Fund had conservative measures such as the dividend law protecting it.

"There was one year where the only revenue the Fund earned was $4 million. Even if (fund managers) invested only in Treasury notes or even the most conservative instruments where there’s no risk, we’d get more than that," he said. "A $4 million return on a $1.2 billion investment is unheard of. So what happened here, that’s what we’re wanting to know. Where did the money go?"

Chairman San Agustin said the board has solicited the help of the attorney general’s office in this matter, but a response has been slow, so the board decided to solicit bids from law firms to do the investigation and claims, if necessary.

"We’ve been asking for their help since 2003, but now we can't wait for them. We have a fiduciary responsibility to our members," he said.

Some stateside retirement funds have successfully made similar claims against fund managers, San Agustin said. However, it still has to be determined how much money the GovGuam Retirement Fund may be able to gain through potential claims to the investment companies. It also is still not clear how much may have been lost through improper investments.

"Quite frankly, we’re still in the dark about all this," he said. "The money is already gone, so if we can even get half of it, a third of it, or a few million of it, that will still be better than nothing."

The Retirement Fund’s coffers also have been at risk because some GovGuam agencies failed to remit their employees’ retirement payments. Though some of those agencies have since paid their debts to the Retirement Fund, the Department of Education and the Guam Memorial Hospital Authority each still owes in excess of $15 million to the Fund.

The Retirement Fund’s board members have recently taken a hard-line stance not to allow any of those agencies’ employees to retire until the debts are paid off or another agreement is made. The board is now working with the governor’s office and Speaker Mark Forbes, R-Sinajana, to draft a law to resolve the situation.

Yesterday, the attorney general’s office wrote to Fund Director Wilfred Aflague, requesting documents on the hospital and education departments' payment history to the Fund.

GMH Administrator Bill McMillan has said the hospital has generally run two pay periods behind in its payments to the Retirement Fund because of its own financial woes.

Attorney General Douglas Moylan said this practice is illegal and the agencies are required to terminate employees if they do not have the funds to pay them.

He said agency heads, certifying officers and even the governor can be held liable if payroll isn’t met properly.

"It’s illegal to keep asking people to work for the hospital when you can’t pay them," Moylan said yesterday.

San Agustin said he’s glad to see the attorney general’s involvement in the matter.

"We welcome the attorney general. In fact, we really need some help here because this is a case of the government taking money out of paychecks supposedly to turn it over to us and instead increasing their own allotment," he said.

March 17, 2005

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