OKLAHOMA CITY — A Norman lawmaker is trying to pull the legislative equivalent of a quarterback sneak to reroute more than $11 million in settlement funds back to the state agencies who originally lost the money.
Norman state Sen. John Sparks, a Democrat, confirmed this week he would try to amend Senate Bill 1868 to earmark $11.7 million in WorldCom settlement funds back to the state retirement systems who originally lost the money.
“The money is in the wrong place,” Sparks said Thursday afternoon. “The money is available as a direct result of the WorldCom settlement. It represents some of what was lost by the agencies who invested in WorldCom.”
Under Sparks’ amendment, the funds — which are under the control of the Oklahoma Department of Commerce — would be shifted back to the various retirement systems who lost money in the WorldCom bankruptcy.
Sparks said his amendment would allocate:
• $4.3 million for the Oklahoma Public Employees Retirement System.
• $2.8 million for the Teachers Retirement System.
• $1.7 million for firefighters retirement.
• $1 million for police officers.
The funds should be returned, Sparks said, because the agencies are “actually the victims of a crime.”
“It’s the principle of the matter,” he said. “The money was lost from our retirement system and now some of that money has been recovered. It should go back to the retirement system.”
As part of a $650 million settlement, Oklahoma received the funds following a lawsuit by Attorney General Drew Edmondson.
More than 32 such suits were filed by various companies and public retirement funds against WorldCom over investments which were made between 1998 and 2001.
WorldCom — which had assets in excess of $100 billion — filed for bankruptcy protection in July 2002 leaving all of Oklahoma’s public pension systems and a handful of state agencies with heavy financial losses.
Edmondson originally settled the fraud charges with WorldCom with an agreement to create 1,600 jobs in Oklahoma. However, those jobs never materialized and, in 2007, an $11.7 million settlement was reached in lieu of the jobs with Verizon Communications, WorldCom’s successor company.
Since the payment of that settlement, the $11.7 million has been parked in an account controlled by the Department of Commerce.
And while many legislative leaders originally agreed those funds should go back to the state’s various retirement systems, some of those lawmakers have now changed their position, Sparks said.
“I think we have an uphill fight,” he said. “I had to do an amendment to get it out of committee. Many people want to sweep this under the rug, they want to use it for other things. The only problem is it was specifically lost from retirement funds, and some was recovered. I believe that money should be returned.”
In August 2007, then-House Appropriation Chair Chris Benge agreed.
Late last summer, Benge issued a media statement saying that “money received from a settlement agreement from the WorldCom accounting fraud should be placed in state employee retirement systems.”
Benge’s statement drew praise from the Oklahoma Public Employees Association.
Benge, the OPEA said, “has shown outstanding leadership regarding this issue. We, as an association, owe him a great deal of thanks.”
Since then things have changed.
Benge is now House Speaker and the state’s budget developed a $117 million leak. Both of those problems have sent retirement system officials scrambling to protect the settlement funds.
Tom Spencer, executive director of the Oklahoma Public Employees Retirement System, said the money should be returned to OPERS because it and the state’s other retirement system, were the original victims.
“We heard the state had settled for $11.7 million. What caught our attention was the funds landed at the Commerce Department,” he said. “And commerce was thinking about how to spend it. We were sorta the victims of the crime, as you will, we thought it more appropriate that those funds come back to us.”
Spencer said state retirement systems lost more than $66 million in the WorldCom bankruptcy and his fund alone lost more than $25 million.
“We have received some funds over the past couple of years,” Spencer said. “But we are nowhere near whole.”
And though some lawmakers downplay the settlement as “a drop in the bucket” when compared to the $8 billion in assets of the Teachers Retirement System, Spencer said his agency’s share — about $4.3 million — would cover his operational costs for a year.
“$4.3 million would pay a pretty good chunk of what it costs to run our office this year,” he said.
Still, both men acknowledge getting the legislation passed won’t be easy.
“Last year it looked doable,” Sparks said. “But this year things could be more difficult.”
Sparks said his proposal — which amends Senate Bill 1868 by Kingfisher Republican Mike Johnson — faces an uphill battle.
“I understand there’s some controversy,” he said. “But it’s something we should do.”
Right now, Sparks said he’s awaiting committee action on SB 1868 and hopes to offer his amendment soon.
In the meantime, retirement officials have crossed their fingers.
With many of the state’s public systems underfunded by millions of dollars, every dollar, they say, adds stability.
“It’s something we’d like to see happen,” Spencer said. “Every few million helps.”
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