N.J. To Sue 4 Major Firms For Loss of $150 Million In Pension FundNov 26, 2002 | The Philadelphia Inquirer
Pinning blame for $150 million in investment losses on allegedly underhanded moves by four major corporations, New Jersey officials announced yesterday that they are joining the ranks of frustrated investors heading to court to get payback.
They said they would file lawsuits this week against Qwest Communications International Inc.; Sears, Roebuck & Co.; Electronic Data Systems Corp.; and Tyco International Ltd.
The suits will allege that corporate wrongdoing strained the already beleaguered New Jersey pension fund, which has lost more than $20 billion during the last two years.
Gov. McGreevey and Attorney General David Samson asserted that the companies had deceived the state in its role as an investor of public money and, therefore, must pay.
This is likely the first in a series of such lawsuits that they said would make the clear distinction between wrongdoing that deserves punishment and normal losses that investors just have to deal with.
"Corporations in America have a legal and moral obligation to abide by the law as well as conduct themselves within the responsible confines of corporate behavior," McGreevey said. "Irresponsible corporate behavior must not be accepted."
State pension funds, reeling since the market downturn, have begun trying to assess blame and protect against future problems. California and West Virginia have filed similar lawsuits.
Pennsylvania is contemplating joining class-action shareholder lawsuits and is investigating which companies to go after.
"Any opportunities the funds see to recover loses through litigation, they're going to take," said Bob Gentzel, a spokesman for the Pennsylvania treasurer.
While announcing the lawsuits in Trenton, Samson said New Jersey had finally agreed to sign on to a $100 million nationwide settlement of a case against Merrill Lynch.
The settlement, contingent on acceptance by all states and territories, is awaiting Missouri's approval.
Samson said New Jersey had agreed to receive its $1.4 million share as long as it could sue if additional irregularities were uncovered.
The deal followed assertions that Merrill Lynch brokerage analysts delivered overly rosy research to lure investment banking business.
Qwest is accused of fraud, malicious misrepresentation and securities fraud on allegations that it failed to disclose billions of dollars in debt and inflated reported revenues.
A spokesman said the company would have no comment.
New Jersey, which poured money into Electronic Data Systems in 1999 and 2000, wants to be the lead plaintiff in two federal lawsuits that allege accounting irregularities.
EDS announced in September that it would miss its earnings projections by 80 percent.
"We believe our actions were proper," EDS spokesman Jim Baptiste said. "We intend to vigorously defend ourselves."
Sears is accused of misleading investors over nine months this year, during which New Jersey bought more than 500,000 shares in the company.
"The claims that are presented in the news release lack merit, and we plan to defend against them vigorously," Sears spokeswoman Jan Drummond said.
New Jersey will accuse Tyco and three criminally charged former executives of causing losses in the pension fund through fraud and accounting irregularities.
Tyco officials did not comment.