Saturday, February 2, 2002

Enron collapse takes
bite out of state
pension fund

A fund official says the retirement
system lost $11.3 million

By Lyn Danninger

Hawaii's state Employees Retirement System was among the many pension funds in the nation that lost money when energy giant Enron collapsed, a state ERS official confirmed yesterday.

The loss to the system amounted to $11.3 million, said David Shimabukuro, an administrator with the ERS. That is 0.13 percent of a fund valued at about $8.4 billion.

Some of the biggest losers in the recent Enron debacle, apart from the company's employees, who lost $850 million from their 401(k) accounts, have been many of the nation's largest pension funds.

Losses to the Florida public employees' retirement system alone amounted to $334 million, with 14 of the top two dozen U.S. public pension funds losing a total of $1.3 billion.

In spite of Hawaii's losses, Shimabukuro said the state's retirees need not worry.

"The pension fund is sound," he said. "We really are long-term investors, and even though our investment managers, like others, were caught by surprise, they still have a good track record."

Now Hawaii may join state employee retirement systems in a class-action lawsuit against Enron and its auditor, Arthur Anderson LP, under the federal Private Securities Litigation Reform Act of 1995.

The act allows for litigation in cases where financial losses result from fraud or criminal conduct.

"We are talking to the Attorney General's Office to determine what legal course of action can be taken," said Shimabukuro.

Rep. Marcus Oshiro (D, Wahiawa), who heard about the losses to the system yesterday afternoon, said he was relieved to hear the retirement system did not sustain greater losses.

"It's terrible that it strikes so close to home. $11.3 million is a lot of money, and it shows you how close some of these national catastrophes can strike," he said. "But we are just fortunate that we didn't put the entire pot into one investment. There are lot of people out there with larger holes in their pockets."

Oshiro said he believes this is likely the biggest single investment loss the state retirement system has ever sustained. "This is the largest loss that I can recall," he said. "This is huge."

Oshiro said it is likely the state would participate in one of the class-action lawsuits now being contemplated by various states.

"My understanding is that we would get a fair share of whatever is recovered, even if we are not taking the lead," he said.

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