PALAU PENSION FUND LOSES $1 MILLION TO FAILED BANK

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By Agnes M. Abrau

KOROR (Palau Horizon, Jan. 3) - The Palau Special Prosecutor has been asked to handle the investigation of the current fiasco at Pacific Savings Bank (PSB).

Senator Santy Asanuma, in a letter to Special Prosecutor Everett Walton dated December 26, said the Attorney General’s Office is in trouble with possible conflict of interest in having to represent the PSB receiver, the Financial Institutions Commission, Pension Fund, and Pension Fund Board of Trustees.

He said this in relation to the US$1 million loss of the Pension Fund, which was deposited to the bank prior to its closure on November 7 in an alleged effort to infuse money to the now defunct bank.

"It was our eminent hope that you will do an investigation and look for necessary evidence as you are the one with proper credentials and expertise," Asanuma said.

Walton told Asanuma in his review of the documents pertaining to the US$1 million infused by the Pension Fund to PSB that it was not a "loan" but rather the US$1 million investment was a deposit.

In his December 20 response to Asanuma’s earlier letter, Walton said he invited the petitioners to produce evidence "that the transaction was a ‘loan’, but no one has produced any evidence that would be persuasive in court."

"There is no Palauan case law which sets forth the principles governing the fiduciary duties of trustees. The pension fund statute likewise provides little guidance. However, in my opinion, the trustees were bound by the ‘prudent investor rule’ under which the degree of care and skill to be exercised in making the investment is judged according to the standard of a person of ordinary intelligence. The trustees’ compliance with their fiduciary duties also is to be judged as of the time the investment decision was made, not with the benefit of hindsight or by taking account of developments that occurred after the time of the decision to make the investment," Walton said.

Asanuma countered that requiring an audited financial statement by independent CPA before releasing US$1 million of Pension fund is "neither hindsight nor dependent on the aftermath of PSB’s failure and still unraveling saga as you contended in your response. He added that based on the minutes of board meetings, the release of US$1 million before signing of documents between the pension fund and PSB is "highly irregular and undoubtedly should warrant investigation."

Asanuma stressed in his letter that the "aggrieved citizens" are hopeful that Walton’s office will help promote their cause.

"Our confidence is based on the fact that you are working for the Palauan people. Plus, it would ultimately be beneficial to the Republic because outside or private attorneys will likely take the whole Pension Fund to the cleaners in the process which will further lead Pension Plan to lose more money intended for our retirement," Asanuma said.

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