Thursday, October 09, 2008

Ohio investment funds take hit

From John Curry, October 9, 2008
Subject: Put a positive spin on this one, Laura!
"Payouts to those receiving pensions from the funds will not be affected, representatives of the funds said."
Let's see if they hold up this promise considering what we've already suffered with our skyrocketing insurance premiums! John
Ohio investment funds take hit

AP Statehouse Correspondent

Published on Thursday Oct 9, 2008
Ohio's much-maligned insurance fund for injured workers has withstood Wall Street's downturn better than most of the state's large public funds, declining 1 percentage point in the same period the state's public pension funds lost billions.
The five pension funds, which hold a combined $170 billion, are designed to handle the market's plunge, their directors say. So is the state treasury, said Ohio Treasurer Richard Cordray. It held more in June than in January.
The performance of the Ohio Bureau of Workers' Compensation's investment fund is notable, however, because of its place at the center of a scandal that broke out in 2005.
Between January and June, the bureau's investment fund fell from $16.2 billion to $15.9 billion, a loss of $220 million, or 1 percent. The value of state pension funds for firefighters, police, teachers, troopers and other public employees fell an average of 8 percent during the same period.
By the end of September, the injured worker fund was down 4 percent for the year. The pension funds for which figures were available at that point had fallen an average of 11 percent.
The state's CollegeAdvantage fund, which holds college tuition investments, is down 7 percent for the year. The fund that pays unemployment benefits to Ohio workers has plunged 24 percent since the start of the year, with a rescue plan in the works to appear on the ballot next month.
Amid it all, the scandal-plagued Workers' Compensation fund is the state's bright light.
Its current ultra-safe investment policy, implemented in the wake of the scandal, is the explanation, said spokeswoman Maria Smith.
The scandal began with revelations in 2005 that prolific Republican fundraiser Tom Noe had been given access to $50 million in bureau funds to invest in rare coins since 1998. As the probe unfolded, it turned out the bureau was also the sole investor in a risky hedge fund set up by MDL Capital Management, which lost $216 million in the venture.
Noe was convicted of theft of funds, and MDL chief executive Mark Lay was convicted of repeatedly misleading the bureau about the risk it was taking in the hedge fund. Both were sent to prison.
Heads rolled, the bureau was restructured, and new investment restrictions were put in place. Legislators banned the bureau from investing in nine high-risk investments: coins, artwork, stamps, antiques and certain unregulated investments.
Gov. Ted Strickland, a Democrat who campaigned against the Republican corruption that led to the scandal, also appointed a new, independent board of directors made up of outsiders who continued to fine-tune the investment policy to make it even safer.
Managers of Ohio's five big pension funds _ Public Employees Retirement System, State Teachers Retirement System, Ohio Police & Fire Retirement Fund, Highway Patrol Retirement System and State Employees Retirement System _ said they are obviously not happy with their losses amid Wall Street's troubles. The biggest is Police & Fire's 14 percent for the year.
"They're long-term investors, so they have provided for these market fluctuations," said Aristotle Hutras, director of the Ohio Retirement Study Council, a legislative panel that monitors state pension funds. "They're no different than anybody else. Warren Buffett's lost money, they've lost money. But it's interim; they'll be back. Right now, there's no place to hide."
Most of the funds aim for 8 percent growth each year, and when they exceed that, they can carry that money over to cover such losses. Payouts to those receiving pensions from the funds will not be affected, representatives of the funds said.

Wednesday, October 08, 2008

Molly Janczyk: Coverage for ostomy supplies

From Molly Janczyk, October 8, 2008
Subject: Ostomy Supplies

I see this concern again on the blog.

From experience: First one must determine if certain supplies are covered by RX plan or Medical plan. Some materials are not covered at all.

If the supplies are Dr. ordered and not covered by RX but are covered by our Medical plan and you are 65 +, Medicare pays 80% of the item after your deductible. STRS pays 80% of the remaining 20% and you are responsible for the remaining 20% of the 20%-generally a few dollars by that time. This is in our materials as STRS is the Supplemental plan to Medicare for us.

If you are not 65, STRS pays 80% on covered medical items and you pay 20% after your deductible up to a max of $1500 out of pocket and $500 deductible. Once we have paid the deduc and out of pocket max per calendar year, STRS pays at 100% for the rest of that year.

Shirlee Zerkel to Mike Nehf: Still no answers

Shirlee Zerkel to Mike Nehf, October 8, 2008
Subject: No answer received
Dear Mr. Nehf:
I sent you an email almost two weeks ago about the Health Benefits Department. On Sept. 11, I had first contacted them about the procedure to purchase ostomy supplies and what would the upfront costs be to the retiree. After my email to you, I did receive a very brief email from a R. Hare at STRS on Monday, the 29th that stated Ms. Knoesel was on vacation that week and that the question would be answered by Mr. Nickel. It also stated that they were aware I had written to you. I have received no answer yet.
I know that the downturn in finances has every one busy and concerned, but the Health Benefits Department is not working on that issue and I do believe that retirees should be able to get their questions answered in a timely manner. It has been almost a month since I first asked Ms. Knoesel the question. Since these supplies are covered by Medicare B and STRS, there surely must be a plan of the procedure that a retiree must follow. Please assist me in obtaining this answer.
Thank you for your time,
Shirlee Zerkel

Shirlee Zerkel to Mike Nehf, September 25, 2008
Subject: Concerns that I would like to bring to your attention!
Dear Mr. Nehf:
I know that you have very important concerns on your mind especially with the situation on Wall Street and the losses that STRS has experienced. But I have some concerns about your Health Benefits Department.
I know that I have had several questions lately for them. I want to thank Ms. Knoesel for getting that no co-pay list out for the retirees and also for answering my questions on the shingles shot. After the no co-pay list came out, I had questions about why ostomy supplies were not on that same list. I did receive an answer for that question from Ms. Knoesel, but was not happy with the answer.
Then I called NationsHealth, our provider for many of the no co-pay supplies and also the ostomy supplies. I asked them about the process that a retiree would need to do for payment of ostomy supplies. I talked to three people there and the only information I received was that Medicare B paid 80% and then those representatives would tell me no more until I actually ordered them.
I emailed Ms. Knoesel on September 11 and gave her the same above information and asked her "how the remaining 20% of the cost is worked out? Does that go to our major med plan or what? Please give me the details of the pay procedure for a retiree. I feel that retirees should be able to find out this information without placing an order." I received no answer from her.
On Monday while I was out, my phone took a message from a Greg Nickell of the Health Benefits department. I then re-sent my email to Ms. Knoesel and asked her if Greg's call was about my question to her. She returned an email to me saying: "I had asked Greg to talk with you so we could get all your questions answered regarding ostomy supplies instead of trading emails back. Greg will be calling you again today."
Greg did call very late that afternoon to make an appointment to talk with me about ostomy supplies by phone on Tuesday at 1:30 P.M. Why couldn't he have talked with me at that time about my questions instead of making a phone appointment. Then on Tuesday my phone took messages from Greg at about 12:40 and 12:50 Tues. He asked me to return the call and also that he had a meeting at 2:00 P.M. I called the non toll-free number at 1:30 and was told by a young lady that Greg was not in. I was upset at this silly round of phone tag and told her that I did not sit by the phone all day before his pre-arranged time to call me.
At 1:35, Greg called me and asked me what my questions were. He should have received that information from Ms. Knoesel. We talked for a few minutes and he had no answers for me but promised to call me in a couple of days or email me with the answers. Well, that phone call was on the 16th. I am still waiting for an answer! This type of run-around by that department is nothing new. Their calls and emails were a waste of work time and money for STRS and still no answers for me.
Thank you for listening to my concerns,
Shirlee Zerkel

Texas Retirement has LARGE Losses. Legislature now investigating

From John Bos, October 8, 2008
Subject: Texas Retirement has LARGE Losses. Legislature now investigating
This is a great newspaper story about Texas Retirement and their investments.
The executive secretary from TEXAS says "WE HAVE LEARNED A BITTER LESSON" regarding our investment strategy. Perhaps all of the young investment personal need more gray hair and experience bad times.
I have yet to hear or read one word that STRS has learned anything!!!!! I would like to know how much we have lost the 1st quarter. July 1 to Sept. 30th!!!!
Legislators may be asked to address Texas pension-fund losses, October 8, 2008
The stock portfolios of some of the state’s largest investments funds — supporting government employees’ retirements and public education — have taken quite a beating this year. By summer, the value of some of the funds had dropped by billions of dollars.
Inflicting damage was the ruthless bear market that smacked hardest U.S. and international financial-sector stocks. That’s where a chunk of the state funds’ investments have been concentrated, records show.
Many funds also had significant stakes in some of Wall Street’s highest rollers that went bust. Some even increased their exposure by buying more shares early this year as the stock of those companies was plunging.
None of the funds have yet to make public their third-quarter rates of return, which would give the most up-to-date look at losses. But by the end of the second quarter on June 30 — before the markets rapidly deteriorated, former Wall Street powerhouses like Lehman Bros. failed and Freddie Mac and Fannie Mae were taken over — all the funds saw significant erosion of their portfolios.
Experts predict even deeper declines once third-quarter data are available.
(Click here to view rest of article.)

Tuesday, October 07, 2008

This will make you ill! Well, STRS stakeholders, we parted with some of our monies to this madness!

October 8, 2008
Big Insurer’s Spending Habits Disclosed
New York Times
Photo: Robert Willumstead, left, and Martin Sullivan, were sworn in Tuesday before testifying before a House hearing on the credit crisis. Mr. Willumstead and Mr. Sullivan are former chief executives of American Insurance Group. The company recently received an $85 billion federal bailout.
A day after questioning the compensation and spending at the bankrupt Lehman Brothers, lawmakers exploring the causes of the credit crisis were treated on Tuesday to examples of the spending habits at another troubled financial firm.
A week after the insurance giant, the American International Group, received an $85 billion federal bailout, executives at its life insurance subsidiary, AIG General, held a weeklong retreat at the exclusive St. Regis Resort in Monarch Beach, Calif. Expenses for the week, lawmakers were told, totaled $442,000, including $200,000 for hotel rooms, $150,000 for food and $23,000 in spa charges.
In addition, the former A.I.G. executive who led the London-based division whose implosion is largely blamed for the insurance giant’s downfall, Joseph J. Cassano, continues to receive $1 million a month from the company, on top of the $280 million he received in the last eight years.
And even after A.I.G. reported $5 billion in losses in the final quarter of 2007, its chief executive at the time, Martin Sullivan, argued before a compensation committee that executives should receive performance bonuses. He received $5 million. “This unbridled greed, this callous abuse of trust of hard-working Americans’ savings is just so disgusting it is hard to put into words, and the anger level in America is coming, as it often has, at Wall Street," Representative Mark Souder, Republican of Indiana, said.
The disclosures came during a second day of Congressional hearings into the causes of the financial crisis roiling global markets, which led to the $700 billion bailout plan signed into law by President Bush last week. In language that echoed Monday’s hearing into the downfall of Lehman Brothers, lawmakers portrayed A.I.G. as a company in which irresponsible executives continued to reward themselves as the company’s fortunes fell.
While Lehman was an investment bank, and A.I.G., at its core, an insurance company, their abuses were fundamentally the same, Representative Henry A. Waxman, the chairman of the House Oversight and Government Reform Committee, said in his opening statement.
“In each case, their executives grew rich by taking on excessive risk,” Mr. Waxman said. “In each case the companies collapsed when these risks turned bad. And in each case their executives are walking away with millions of dollars while taxpayers are stuck with billions of dollars in costs.”
And in each case, he added, “they refuse to accept any blame for what happened to their companies.”
Martin Sullivan, who served as A.I.G chief executive from March 2005 until June 2008, and Mr. Robert B. Willumstad, who served from June 2008 until A.I.G. received federal assistance, spent more than two hours answering questions. The current chief is Edward M. Liddy.
In their testimony, both Mr. Willumstad and Mr. Sullivan attributed the company’s failure largely to mark-to-market accounting rules that forced A.I.G. to recognize tens of billions of dollars in accounting losses, as well as to a tsunami of market instability ignited by the collapse in value of mortgage-backed securities.
“Looking back at my time as C.E.O., I don’t believe A.I.G. could have done anything differently,” Mr. Willumstad said. “The crisis that required A.I.G. to seek assistance from the Federal Reserve is not limited to A.I.G. It is a marketwide crisis of confidence that has affected the entire financial industry and the American and global economy.”
“A.I.G. was caught in a vicious circle,” Mr. Willumstad said.
But Mr. Waxman and other lawmakers disputed Mr. Willumstad’s defense, as did a specialist who testified about the causes of A.I.G.’s collapse.
“A.I.G. is blaming its downfall on accounting rules which require it to disclose losses to its investors,” the specialist, Lynn E. Turner, the former chief accountant at the Securities and Exchange Commission, said. “That’s like blaming the thermometer, folks, for a fever.”
Lawmakers also heard other assertions about the actions of executives, which were culled from a review of thousands of documents obtained by the committee.
An accountant, Joseph St. Denis, who had been hired by A.I.G. to address accounting problems, was not given access to the very unit whose losses, mostly in toxic credit-default swaps, led to the bailout, lawmakers were told.
Mr. Cassano told Mr. St. Denis, according to testimony, that he had been “deliberately excluded” from the evaluation of AIG Financial Products, to avoid “polluting the process.” Mr. St. Denis resigned in protest.
On Dec. 5, 2007, the chief executive, Martin J. Sullivan, told investors that the company had, “a high degree of certainty in what we have booked to date.” But his comments came, Mr. Waxman told the committee, despite serious concerns raised a week earlier by the auditing firm PricewaterhouseCooper.
Lawmakers were also shown slides of the gilded lobby and sweeping staircases of the St. Regis hotel, where company executives had retreated after their company had been bailed out.
“Less than one week after the taxpayers rescued A.I.G., company executives could be found wining and dining at one of the most exclusive resorts in the nation,” Mr. Waxman said.
The federal government bailed out A.I.G., the world’s largest insurance company, with an $85 billion loan on Sept. 16, after the company failed to find private banks and investment firms to lend it money. It was a watershed event for lawmakers, who said the rescue put taxpayers’ money at risk to save a private enterprise that should have been regulated more closely.
The company, whose businesses stretched from leasing aircraft to selling life insurance in rural India, had become dangerously entangled with the financial industry because of its web of complex insurance contracts.
While the long-time chief executive Maurice R. Greenberg, 83, whose personal fortunes dropped by some $5 billion because of the bailout, did not appear, he did provide a written statement.
In his testimony, Mr. Greenberg said his successors were responsible for the record losses that led to the bailout.
“When I left A.I.G., the company operated in 130 countries and employed approximately 92,000 people,” Mr. Greenberg said in a statement. Today, the company we built up over almost four decades has been virtually destroyed.

From John Curry, 10/7/08

Americans' retirement accounts lost $2 trillion in past 15 months

By Julie Hirshfeld Davis, Associated Press Writer
October 7, 2008 (AP)
WASHINGTON — Americans' retirement plans have lost as much as $2 trillion in the past 15 months, Congress' top budget analyst estimated Tuesday. The upheaval that has engulfed the financial industry and sent the stock market plummeting is devastating workers' savings, forcing people to hold off on major purchases and consider delaying their retirement, said Peter Orszag, the head of the Congressional Budget Office.
As Congress investigates the causes and effects of the financial meltdown, the House Education and Labor Committee was hearing from retirement savings and budget analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States.
Click here to view entire article.

Monday, October 06, 2008

News release from the AG's office: $97.5 Million Partial Settlement Reached In AIG Securities Case

CONTACT: Michelle Gatchell Deputy Director of Communications
$97.5 Million Partial Settlement Reached In AIG Securities Case
Three Ohio Pension Funds Come To Agreement With AIG's Auditor
The office of Ohio Attorney General Nancy Rogers announced today that PricewaterhouseCoopers LLP has agreed to pay $97.5 million to settle investors' claims in securities litigation against American International Group, Inc. (AIG). This settlement will be one of the ten highest settlements to be paid by an accounting firm to settle a securities fraud class action.
PricewaterhouseCoopers, which continues to serve as AIG's independent auditor, was alleged in the class action complaint to have violated the securities laws in connection with its providing auditing services and its issuance of unqualified audit opinions on AIG's financial statements during the years at issue in the case.
"This important settlement represents a tremendous result for investors," said Chris Geidner, Principal Assistant Attorney General. "We are pleased with this milestone and will continue to vigorously pursue investors' claims against the remaining defendants in the case."
The Ohio Attorney General's Office is prosecuting the case on behalf of three named plaintiffs, the Ohio Public Employees Retirement System, State Teachers Retirement System and Ohio Police & Fire Pension Fund, and seeks damages for investors who purchased AIG securities between October 28, 1999 and April 1, 2005.
The plaintiffs' claims are based on AIG's alleged involvement in a market division scheme with others in the insurance industry that was disclosed in October 2004, as well as AIG's improper accounting for reinsurance and other transactions that led to the company's $3.9 billion restatement or adjustment of earnings in May 2005. Those accounting problems led to the ouster of AIG's then-Chairman and Chief Executive Officer, Maurice R. "Hank" Greenberg, as well as several other senior company executives.
The settlement must be approved by the United States District Court for the Southern District of New York in Manhattan. The Ohio Attorney General's Office and the three Ohio pension funds are represented in the case by Labaton Sucharow LLP in New York City, and Hahn Loeser & Parks, LLP, which has offices in Cleveland and Columbus.

Thanks to Dennis Leone for submitting this item.

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