IBJNews

State sues teachers' union for securities fraud

Back to TopCommentsE-mailPrintBookmark and Share

Indiana Secretary of State Todd Rokita's office sued the Indiana State Teachers Association for securities fraud Wednesday, saying the teachers' union is unable to account for $23 million in funds.

The lawsuit is the latest problem to arise out of the ISTA Insurance Trust, which collapsed this summer after massive investment losses.

Filed in Marion Superior Court, the lawsuit alleges that ISTA offered unregistered securities to dozens of Indiana school corporations when it promised to create an insurance fund both pay their health claims and generate a return on the fund's reserves. ISTA officials acted as investment advisers without the proper licenses, according to the lawsuit, which also accuses them of co-mingling money meant for health benefits with other funds, including payments to a long-term disability plan.

The suit alleges the co-mingling led ISTA officials to lose track of $23 million.

ISTA spokesman Mark Shoup said it is "premature" to directly respond to the suit's allegations. He stressed that the ISTA is paying its 650 members who are covered by the long-term disability benefits plan.

The ISTA insurance trust also provided health benefits to more than 2,000 teachers. Their benefits are now being administered by the local office of UnitedHealthcare, a Minnesota-based health insurer.

"We continue to make the payments, and do what’s best for them," he said. "We’re just trying to pick up the pieces and move forward and do right by the people who have depended on the trust."

However, Rokita and his securities division chief, Chris Naylor, want a judge to freeze ISTA’s finances and appoint a receiver to account for all the school corporations’ invested funds. They asked for the freeze not to stop the distribution of the long-term disability benefits.

“The latest evidence indicates that ISTA is now offering these Indiana school corporations pennies on the dollar in an effort to wipe away their liability,” said Rokita in a statement. “The purpose of this action is to request that an independent third party be assigned to ensure transparent accounting and equitable distribution of any remaining funds, while not interrupting any payments being made to disabled teachers.”

In May, the Indiana Department of Insurance cracked down on the ISTA Insurance trust after an investigation found the value of the trust’s investments had plunged 55 percent in the previous 20 months, leaving it $67 million short of its liabilities.

After the revelations, ISTA’s parent organization, the National Education Association, assumed temporary control of the state-level operations—though not of its local affiliates. Rokita's lawsuit also names the NEA as a defendant.

The Insurance Department faulted ISTA’s former executive director, Warren Williams, and the trust’s investment adviser, Morgan Stanley's David Karandos.

During a nine-month stretch last year, Karandos made 4,000 trades involving the ISTA trust's investments. He also put large portions of the trust’s assets in hard-to-sell investments, such as stakes in private-equity deals and hedge funds.

Karandos and Williams made all investment decisions for the trust, according to a report by Indianapolis-based Noble Consulting Services, which examined the trust at the request of the Indiana Department of Insurance.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
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
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Uh, sorry Johnnie, but you are incorrect. Despite the assertions by yourself and various defenders and captains, sports attendance is NOT off significantly at most sporting events in the US. Variances in attendance has been in the range of single digits, both + & - for years now. MLB has had most of its best overall attendance nubers in the last decade, and that trend has been consistent for most major sporting events. The number one issue cited by most fans when asked about attendance is the overall cost of attending. The presence of HD and big screen televisions in home doesn't even register, as a factor for not attending an event. VALUE in the product is the key, and apparently is something lacking in the current ICS. What other explanation is there when with what is routinely touted as the "best" racing on the planet, fans are staying away in DROVES. A "close" title battle into the last event at Fontana, with the "cars and stars" of the ICS, and who showed up? MAYBE 8K. Sorry, but HD TV isn't to blame for that kind of fan apathy.

  2. Do you need finance to establish your business ? Are you interested in getting a loan at 3% from our private company? If so please Email: suntrust_oil@blumail.org

  3. If she was worth the $ the public outcry over direct tv dropping them would have kept them on their dishes as we have seen with other companies. I too quit watching channel 13 after she showed up since I left channel 8 because of her all show rather than production results. When Randy on 8 corrected her she had a big head and incorrectly challenged his correction for pronunciation of a city. Other antics while she matures was too much for me with her very inaccurate forecasts. All the forecasters were predicting rain until Thursday except Chris. They predicted sunny on Thursday but instead of rain until Thursday upon which the sun would finally make it out in full glory Chris was right on the money just as I too predicted looking at the radar on weather.gov. One thing I love about Angela is the fear you can see in her every time it thunders in the winter. It far exceeds the entertainment value of her body language (high heel noise drags, depression, etc) when her forecasts are so incorrect. Her hair stands on end, you have to see it!!!

  4. Good Day, Apply For A Loan I am Mr Fernadez Antonio, a private Loan lender and a cooperate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and cooperate bodies at 3% interest rate We offer any kind of loans. email us via fernadezloaninvest@outlook.com LOAN APPLICATION FORM First name:......................... Middle name:......................... Last name:........................................ Date of birth (yyyy-mm-dd):....................... Gender:........................................... Marital status:................................... Total Amount Needed............................... Loan Duration.................................... Address:.......................................... City:............................................. State/province:................................... Zip/postal code:.................................. Country:.......................................... Phone:............................................ Fax:.............................................. Mobile/cellular:.................................. Monthly Income.................................... Occupation:....................................... Best Regard, Mr Fernadez Antonio.

  5. i will love to share my testimony to you all the people in world i got married to my husband about 2 year ago we start having problems at home like we stop sleeping on the same bed,fighting about little things he always comes home late at night,drinking too much and sleeping with other women out side i have never love any man in my life except him. he is the father of my child and i don't want to loose him because we have worked so hard together to become what we are and have today .few month ago he now decided to live me and the kid,being a single mother can be hard sometimes and so i have nobody to turn to and i was heart broken.i called my mom and explain every thing to her,my mother told me about DR.okoro how he helped her solve the problem between her and my dad i was surprise about it because they have been without each other for three and a half years and it was like a miracle how they came back to each other. i was directed to DR. okoro on his email:okorospell@gmail.com and explain everything to him,so he promise me not to worry that he will cast a spell and make things come back to how we where so much in love again and that it was another female spirit that was controlling my husband he told me that my problem will be solved within two days if i believe i said OK So he cast a spell for me and after two days my love came back asking me to forgive him i Am so happy now. so that why i decided to share my experience with every body that have such problem contact Dr okoro the great spell caster on his email addresses spellcasterforlove@outlook.com

ADVERTISEMENT