Mass Laborers’ Pension Fund Joins Growing List of News Corp Plaintiffs

The Massachusetts Laborers’ Pension and Annuity Funds has sued Rupert Murdoch and other News Corp directors over lack of oversight and a breach of fiduciary trust, adding to a growing list of investor lawsuits hitting News Corp in the midst of the phone hacking scandal.

(July 21, 2011) – The Massachusetts Laborers’ Pension and Annuity Funds (Mass. Labor) has filed a lawsuit against Rupert Murdoch and the other directors of media giant News Corporation, adding to the list of shareholders who are suing the company for failure to act in the wake of the recent phone hacking scandal.

The Burlington, MA based Mass. Labor filed the suit in the Delaware Chancery Court on July 15. In the lawsuit, Mass. Labor accused Murdoch and the directors of “failure to take any action to investigate, control, and limit the fallout from the hacking scandal” that “caused the Company to lose billions of dollars in value,” according to the suit. The suit also alleges that Murdoch engaged in nepotistic business practices that bought companies run by family members for inflated prices and that the phone hacking scandal prevented News Corp from acquiring British Sky Broadcasting Group PLC, a move which would have helped increase the value of News Corp.

Mass. Labor joins a group of other pension funds seeking damages for News Corp’s break of its fiduciary agreement. All of the suits are being filed in Delaware because News Corp is chartered there.

On July 11, aiCIO reported that the original lawsuit filed in May 2011 had been supplemented with a suit whose plaintiffs included the New Orleans Employees’ Retirement System and the Central Laborers Pension Fund. The pension funds joined a trustee for several large investment funds in the suit.

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The main claim of the plaintiffs in the suit is that Murdoch and the board of News Corp failed to intervene in response to the phone hacking allegations against the company. “These revelations should not have taken years to uncover and stop,” reads the amended complaint, which was filed on July 8, and was obtained by Bloomberg. “These revelations show a culture run amuck within News Corp. and a board that provides no effective review or oversight.”

According to the complaint, “Although the scandal first came to light in 2005…it is inconceivable that Murdoch and his fellow Board members would not have been aware of the illicit news gathering practices…And yet, the Board took no real action to investigate the allegations until July 7, 2011, when Murdoch selected two of his co-directors to deal with the imbroglio.”

The impetus for the amendments to the lawsuit was News Corp’s reported fall of $7 billion in market value since the scandal broke in early July.

By Justin Mundt

Maryland State Retirement System’s Former Actuary Liable for $73 Million

The Court of Appeals of Maryland has ruled that Milliman, Maryland State Retirement and Pension System’s actuary from 1982 to 2006, is liable for damages of approximately $73 million for faulty actuarial valuations that left the state’s plans underfunded.

(July 21, 2011) – In a July 20 ruling, the Court of Appeals of Maryland upheld a $73 million award to the Maryland State Retirement and Pension System (MSRPS) from the System’s former actuarial firm Milliman, concluding that the actuary’s repeated errors had left three of the state’s ten plans underfunded.

The court held that Milliman had failed to include in its actuarial valuations benefits payable to the surviving spouses of participants in the State Police Retirement System, Law Enforcement Officers’ Pension System, and Judges’ Retirement System over a 22 year period. The $73 million in damages represents the value of the lost contributions and investing earnings on those contributions that resulted from Milliman’s errors.

“We’re obviously very happy with the decision,” Michael Golden, Director of External Affairs at Maryland State Retirement and Pension System, told aiCIO. “Soon we can recover the $73 million and put it into the trust fund where it belongs.” He explained that the MSRPS now had a system in place in to prevent such an error from happening again.

“This is a victory for Maryland state employees and the retirees who depend on a sound retirement system in their golden years,” said Attorney General Douglas F. Gansler in a release. “I’m grateful for the exceptional work of the Assistant Attorneys General whose dedication to this case just confirmed our assertion that outside contractors hired by the state will be held accountable for the serious and costly mistakes they make.”

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Milliman performed annual actuarial valuations for MSRPS from 1982 to 2006 to determine the necessary amount of state contributions necessary to fund future liabilities. The Maryland State Board of Contract Appeals earlier ruled that Milliman had failed to meet professional actuarial standards because of its repeated errors and that in doing so the actuary had breached its contracts with the retirement system.

“We are pleased with the outcome,” State Treasurer Nancy K. Kopp, who also serves as Chair of the Board of Trustees of the MSRPS, said in the release. “Today’s decision by the Court of Appeals offers further proof that we take our fiduciary responsibilities seriously and that we will pursue all avenues to protect the system for our members and their families.”

Click here to read an article from aiCIO’s summer issue discussing the challenges pension funds face in calculating the correct amount of actuarial liabilities by Charles E.F. Millard, the former director of the Pension Benefit Guaranty Corporation (PBGC).

To contact the aiCIO editor of this story: Benjamin Ruffel at <a href='mailto:bruffel@assetinternational.com'>bruffel@assetinternational.com</a>