The state’s retirement system is suing 16 accounting firms and banks for failing to disclose the financial condition of telecom giant WorldCom.
WorldCom’s bankruptcy last July has cost the Maine State Retirement System $38 million, or about six-tenths of one percent of its portfolio, the lawsuit filed in Kennebec County Superior Court alleges.
Kay Evans, the retirement system’s executive director, said, “There is a loss here, and we believe that the responsibility for the loss can be attributed to the defendant accountants and underwriters.”
Among the defendants listed in the lawsuit are Citigroup, Salomon Smith Barney, J.P. Morgan Securities, and Arthur Andersen.
Four months after WorldCom, the nation’s second largest telecommunications company, filed for bankruptcy, the federal Securities and Exchange Commission alleged that its financial statements had been overstated by $9 billion since 1999.
Maine’s state retirement system, which lists $6 billion in assets, bought WorldCom bonds at various times from 1998 through 2001.
The San Diego law firm representing the state retirement system, Milberg Weiss, is handling similar lawsuits by more than 50 large public and private pension funds, said Spencer Burkholz, a lawyer at the firm.
Payments from Maine’s retirement system, which mails out 30,000 checks totaling $30 million to retired state employees each month, will be unaffected, Evans said.
“A loss of $38 million, while not small, relative to the assets is not large at all,” she said. “The people who are receiving and going to receive in the future do not bear investment risk. … It’s very important to have perspective.”