Secretary of state files complaint against teachers' fund broker

Back to TopCommentsE-mailPrintBookmark and Share

David Karandos, a broker who advised the Indiana State Teachers Association Insurance Trust before it collapsed in 2009, is facing an administrative complaint from the Indiana Securities Division, which alleges 13 violations of the Indiana Securities Act for unethical, dishonest and deceptive practices.

The complaint comes nearly a year after Secretary of State Todd Rokita sued ISTA for securities fraud, saying the union could not account for $23 million invested by school corporations.

The complaint Rokita announced Wednesday alleges that Karandos advised the ISTA to invest its trust fund reserves in alternatives such as hedge funds and private equity funds – illiquid investment products that come with long-term obligations, but offered large up-front commissions for Karandos.
“This is money that was supposed to be kept safe to be used by the ISTA Insurance Trust in meeting its obligations to retired teachers and others with long-term care needs,” Rokita said in a prepared statement. “Now, because of these irresponsible and deceptive actions, along with other misdeeds and mishandlings, we’re forced to comb through a complex maze of ISTA funds in hopes of accounting for $23 million that ISTA admits is missing related to our federal litigation.”

If the allegations are proven by the Securities Division, Karandos could face a fine of up to $10,000 per violation, be ordered to pay restitution and could potentially be permanently barred from the securities industry in Indiana.

Karandos' Chicago-based attorney Steven Gomberg did not return a phone call from IBJ Wednesday afternoon. Karandos could not be reached at the number listed as his home in Indianapolis.

Indiana's 25-page securities complaint filed Tuesday paints a picture of Karandos leveraging his personal relationship with former ISTA Executive Director Warren Williams to ramp up the insurance trust's risky holdings. Karandos had been the investment adviser representative since 1991, but according to the complaint, he grew close to Williams, introducing him to his current wife and becoming his personal investment adviser.

When the CEO of the insurance trust left, Williams took over that role and became solely responsible for its investment decisions in 2003. The complaint alleges that from 2003 to 2007, the insurance trust's alternative holdings grew from 10 percent to 62 percent of its portfolio, or $20 million.

The ISTA Insurance Trust is one of the co-defendants in a federal securities fraud suit brought by the Indiana Securities Division against the ISTA. That suit alleges that ISTA unlawfully offered and sold investments in a health arrangement to dozens of Indiana school corporations, violating several provisions of the Indiana Securities Act.

This week the state amended that complaint to include the National Education Association as a co-defendant. The NEA took over ISTA's day-to-day operations in May 2009, and the lawsuit said as a result it had a responsibility to supervise its personnel.

According to the December complaint against ISTA, money paid into the ISTA-controlled trust that was intended to be used for health claims was co-mingled by ISTA with funds from other sources including long-term disability plan payments and invested by ISTA without the knowledge of the school corporations. The complaint alleges that ISTA now is unable to properly account for approximately $23 million intended for school districts.

The ISTA Insurance Trust was responsible for the issuance of medical and long-term disability plans endorsed and provided by ISTA. The medical plan offered a feature that allowed school corporations to set aside their excess balances in order to earn investment returns to be used to offset future costs. Karandos was responsible for advising the trust on how to invest and calculate a rate of return for these dollars.


  • Oh My!
    Take a look at the latest Jeff.
  • Typical - what do you expect from a bunch of Schoolroom Teachers
    No surprise here... An organization ran by administrators with an Education Specialty overseeing $$$,$$$,$$$.$$...
    No surprise here is there. A guy from 1991 has been in charge of the cookie jar with one of his inside crony buddies that takes the helm?

    Did anyone ever listen to the Independent Auditors to avoid BASIC DEFALCATION POTENTIAL?

    What a load of CRAP. ISTA is not a State Government Entity. they should hire their own lawyers. So my tax dollars are spent with having ROKITA chase this crap instead of investigating State Leases handed out by JOHN BALES TO CARL BRIZZI AND OTHERS?

    Rokita your no MAN.

Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. If I were a developer I would be looking at the Fountain Square and Fletcher Place neighborhoods instead of Broad Ripple. I would avoid the dysfunctional BRVA with all of their headaches. It's like deciding between a Blackberry or an iPhone 5s smartphone. BR is greatly in need of updates. It has become stale and outdated. Whereas Fountain Square, Fletcher Place and Mass Ave have become the "new" Broad Ripples. Every time I see people on the strip in BR on the weekend I want to ask them, "How is it you are not familiar with Fountain Square or Mass Ave? You have choices and you choose BR?" Long vacant storefronts like the old Scholar's Inn Bake House and ZA, both on prominent corners, hurt the village's image. Many business on the strip could use updated facades. Cigarette butt covered sidewalks and graffiti covered walls don't help either. The whole strip just looks like it needs to be power washed. I know there is more to the BRV than the 700-1100 blocks of Broad Ripple Ave, but that is what people see when they think of BR. It will always be a nice place live, but is quickly becoming a not-so-nice place to visit.

  2. I sure hope so and would gladly join a law suit against them. They flat out rob people and their little punk scam artist telephone losers actually enjoy it. I would love to run into one of them some day!!

  3. Biggest scam ever!! Took 307 out of my bank ac count. Never received a single call! They prey on new small business and flat out rob them! Do not sign up with these thieves. I filed a complaint with the ftc. I suggest doing the same ic they robbed you too.

  4. Woohoo! We're #200!!! Absolutely disgusting. Bring on the congestion. Indianapolis NEEDS it.

  5. So Westfield invested about $30M in developing Grand Park and attendance to date is good enough that local hotel can't meet the demand. Carmel invested $180M in the Palladium - which generates zero hotel demand for its casino acts. Which Mayor made the better decision?