ISTA insurance fund sues ex-officials

The Indiana state teachers union’s insurance fund has filed a lawsuit alleging former officials, financial advisers
and consultants mismanaged a long-term disability insurance trust.

The lawsuit was filed Thursday in Marion Superior
Court by Ed Sullivan, The Indianapolis Star reported Friday. Sullivan was appointed sole trustee over the Indiana State
Teachers Association and its insurance fund in May as part of a takeover by its parent, the National Education Association.

Teachers already had filed a lawsuit seeking to recover damages from ISTA and many of the same defendants.

ISTA’s
suit names Warren L. Williams, ISTA’s former executive director, who resigned in May, and Robert Frankel, the fund’s former
director, among several defendants.

The fund’s value plunged to near bankruptcy during the last two years, leaving
disability benefits for 650 school employees in jeopardy with a projected $45 million to $65 million shortfall in the next
15 to 20 years.

Both NEA and ISTA officials have said since the NEA takeover that the organizations would cover all
future claims. ISTA has sold its downtown Indianapolis building to the NEA to raise money and also has issued layoff notices
to at least 40 employees.

ISTA chose not to sue the trust’s former board members, its attorneys said.

The lawsuit
claims Williams and investment adviser David Karandos placed an unusually high percentage of investments in hedge funds and
high-risk equities that are not publicly traded, without the board’s consent and in violation of a 2004 investment policy.

ISTA’s lawsuit also names: Karandos and the companies where he worked, UBS Financial Services and most recently Morgan
Stanley; Wisconsin-based Huttleston Associates, which served as a consultant and program administrator; Kansas-based McInnes
Maggart Consulting Group, which was a consultant on ISTA’s medical insurance programs; and Illinois-based Crowe Horwath,
which served as the trust’s auditor.

Claims include breach of trust and fiduciary duty, negligence, constructive
fraud, conspiracy, aiding and abetting, and professional malpractice.

The Associated Press left a message seeking comment
Friday at a telephone listing for a Warren L. Williams in Indianapolis. There was no answer at a residential listing for
Karandos, and Morgan Stanley offices in Indianapolis said he did not work there. No residential listing for Frankel could
be found.

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