LAWYERS: CNMI PENSION FUND CAN’T DECLARE BANKRUPTCY

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Attorney representing retirees prefer federal receivership

By Andrew O. De Guzman

SAIPAN, CNMI (Marianas Variety, April 23, 2012) – The Retirement Fund, which is seeking Chapter 11 bankruptcy protection, cannot do so because it is not a "person," according to the lawyers of anonymous retirees who want the pension agency placed under federal receivership.

"The Fund does not meet Chapter 11 requirements," stated attorneys Margery S. Bronster and Robert M. Hatch in a motion filed in federal court.

Bronster and Hatch are working with local attorney Stephen Woodruff.

During oral arguments before Chief Bankruptcy Judge Robert Faris, Fund attorney Jeremy Coffey said his client is "an eligible debtor."

But in their motion to dismiss the Fund’s bankruptcy petition, the anonymous retirees’ lawyers said that only a "person that may be a debtor" may file a Chapter 11 petition in bankruptcy.

The lawyers cited 11 United States Code, section 109 (d).

They said the Fund "is plainly an ‘agency’ of the Commonwealth of the Northern Mariana Islands and as such cannot file a bankruptcy petition under Chapter 11 of the code."

They said the Fund was created by virtue of a local statute, P.L. 6-17, "to provide retirement security and other benefits for [CNMI] government employees."

The Fund is an "autonomous agency" of the commonwealth, the lawyers added.

The Fund is run by a board, and its members are appointed by the government with the advice and consent of the Senate, the lawyers added.

They said the court should dismiss the Fund’s Chapter 11 petition because it violates "11 USC section 101 (27), (41), and 109 (d)."

In his corporate ownership statement submitted to federal court, Fund Administrator Richard Villagomez declared: "The debtor [the Fund] is a public corporation and autonomous agency of the Commonwealth of the Northern Mariana Islands, established on Oct. 1, 1980 pursuant to Public Law No. 6-17, as codified at 1 CMC section 8301 et. seq., and restructured May 7, 1989."

Villagomez was empowered by the board of trustees as its authorized officer for these bankruptcy proceedings.

On April 17, 2012, the Fund, through attorneys Coffey, Steven Pohl and Braddock Huesman, filed a Chapter 11 bankruptcy petition in federal court for protection as the agency restructures its obligations.

They said the Fund intends to pay its creditors within 60 days.

As of Dec. 31, 2011, the Fund said it had $256,697,654 assets in portfolio, of which $113 million was for the employee portion of assets as encumbered by the Superior Court. The assets available to pay benefits were $143,697,654.

The CNMI government, for its part, owes the Fund about $325 million.

According to Fund lawyers, a benefit reduction of 58 percent is required to sustain the Fund’s existence based on its current actuary study in 2009, otherwise the Fund "will have extinguished the entirety of its assets by July 2014."

The Fund told the federal court that it "has met resistance at every turn" as it tried to compel the CNMI government to pay what it owes the pension agency.

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