- The Washington Times - Wednesday, August 21, 2002

If there is one thing the Bush administration had better pay lots of attention to it is the monetary losses suffered by state and local government pension funds because of corporate misbehavior and malpractice accounting in companies like Enron, Global Crossing, Tyco, Xerox, Dynegy. Public pension funds, which have lost more than $4 billion from WorldCom alone, are going after WorldCom in a new class action lawsuit.
Public servants, at work or retired, are one of the most important organized voting blocs in the nation and President Bush ought to take a close look at their reaction to the corporate scandals. One thing the Bush administration should consider is how to deal with the CEOs and other executives who ran these corporations into the ground and thereby did economic injury not merely to hundreds of thousands of individual investors but also to the government pension systems whose investment managers trusted these companies.
These corporate executives have managed to squirrel away millions if not billions of dollars for themselves while they sold out their employees and stockholders. Should they be allowed to keep that money protected by due process of law? Should the accountants who made these swindles possible be allowed to keep their stained profits and fees? The Justice Department ought to consider joining in amicus curiae briefs the suits that state and local pension systems are planning to bring against these CEOs.
The people who administer these pension funds for retired civil servants are bitter at what has happened. They are realists about equity investment. Said Ralph White, a trustee of the Massachusetts fund:
"It's a question of trust, not blind trust, but reasonable trust. We maintain strict due diligence on our investments, but if so-called blue chip companies in collusion with accountants have been cooking their books we all get hurt. If we have money in a company and the company fails because of market conditions or the product itself fair enough, we lose. But when CEOs and accountants lie about the company's assets, while lining their own pockets, they are thieves. They should do time hard time."
Said Tom Herndon, director of the Florida State Fund: "We ought to be putting some of these guys in jail. Someone has got to stand up and say, 'I've had it and I'm not going to take it anymore." Florida, which had already lost $300 million on Enron, has lost $90 million on World Com.
One of the plaintiffs in this suit, the Massachusetts Pension Plan, lost $25 million in actual and unrealized losses through what it calls "WorldCom's alleged defrauding of its shareholders." Maryland's state pension system lost about $52 million in the WorldCom scam. California, the largest state pension system, lost an unbelievable $590 million. New York has lost $300 million and Washington State $83 million. For these six state pension systems alone (including Florida) the loss on WorldCom was $1,140 billion. But in addition, hundreds of local government retirement systems have lost "millions due to the illegal bookkeeping of Enron, WorldCom and other corporate giants," according to the Massachusetts Pension Plan.
In his masterwork, "The Economic Consequences of the Peace," John Maynard Keynes wrote: "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency." Today when millions and millions of Americans are investing their life savings in bonds and equities we might update Keynes:
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the securities market in which so many pension funds are invested.

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