LAWSUIT CLAIMS VALIC MISLED W. VA. TEACHERS

According to a statement on the Web site for Bell & Bands PLLC: “… VALIC engaged in a systematic scheme of hiring agents, with whom the teachers, school service personnel, and professional staff were familiar with as former colleagues, prominent local citizens, and/or apparently-credible retirement consultants whom they could trust.” The statement said the VALIC agents touted increased benefits of going with VALIC option and pitfalls of remaining in the TRS.

The law firm said it believes the representations made by VALIC agents were not based on facts and were “clearly fraudulent.” Bell & Bands said its research revealed, for example, that TRS members were told that the TRS would be bankrupt by the time they retired.

The suit was brought on behalf of current and former TRS members that transferred into the TDC and invested in VALIC annuities by Bell & Bands and The Webb Law Firm, PLLC. The suit claims that as a result of the fraud, those employees have had far less returns on their investments than they would have in the TRS.

The lawsuit seeks actual damages for member losses suffered as a result of their purchase or transfer of retirement funds into these annuities, plus punitive damages against VALIC for its fraudulent misrepresentations.

An Associated Press news report said Consolidated Public Retirement Board Executive Director Anne Lambright was told by the lawyers behind the suit that they plan to sue the board as well.

According to the AP, AIG Retirement Services spokesman John E. Pluhowski said in a statement: “VALIC offered a fixed annuity product to the plan and we are confident that we met the obligations we were contracted to provide.” The news report said VALIC also balked at the idea of helping pay some of the costs of moving TDC members into the TRS suggested by Gov. Joe Manchin after meeting with AIG officials last month.

State legislators have approved a measure allowing teachers to transfer back into the TRS from the TDC, but estimates show the switch could cost as much as $78 million (See WVA Pension Transfer Bill Delayed for Cost Analysis).

Source/Writer:

Planadviser.com

Writer: Rebecca Moore

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LAWSUITS FILED IN TEACHER PENSIONS

Two Charleston law firms are filing a class-action lawsuit on behalf of participants in the Teachers Defined Contribution plan, contending that many were fraudulently misled into investing most or all of their pension contributions into low-interest fixed rate annuities.

“It’s based on fraud and misrepresentation,” said Rusty Webb, whose law firm has joined with Bell & Bands in filing the lawsuit in Marshall Circuit Court.

The suit contends that representatives of Variable Life Insurance Co. (VALIC) misled thousands of participants in the 401(k) style TDC plan to invest heavily or entirely in their low-interest rate annuities in the early 1990s. VALIC has since been acquired by AIG Retirement.

“There’s a constant pattern of misrepresentation,” Webb said Thursday. “Whether you talk to someone in Marshall or Mercer county, or Berkeley or Cabell, the scenario is identical.”

Because of poor investment decisions, the vast majority of the nearly 19,000 teachers, school service personnel and administrators enrolled in TDC have critically under-funded retirement portfolios. That led to legislation this spring to give TDC enrollees the option to transfer to the Teachers Retirement System, a defined benefits plan.

Webb said the firms waited until the transfer election deadline of midnight Monday before filing the lawsuit.

“We didn’t want to file it before the voting was over,” he said. “We didn’t want to confuse an already confusing situation.”

The suit alleges that VALIC hired retired principals, school administrators and other “prominent local citizens” to sell the fixed-rate annuities in the schools. VALIC agents, the suit contends, systematically misled teachers and school personnel, advising many to switch from a TRS system they warned would soon be bankrupt, and encouraging investment in “safe” annuities, instead of “gambling” on stocks and bonds. In addition to VALIC and its agents, the firms also intend to make the Consolidated Public Retirement Board a party to the suit.

“We believe they had a fiduciary responsibility to not allow these quote-unquote investment advisers to run amok around the state,” Webb said.

Anne Lambright, director of the CPRB, said she received the required 30-day notice of the firms’ intent to sue the agency on Thursday. Under state law, 30-day notice is required before lawsuits are filed against state agencies or public officials. Lambright said she could not comment on the suit, because all she has received is the letter of notice.

“I can’t give you an answer or any kind of comment because I haven’t seen the complaint,” she said.

However, she said the office was flooded with calls Thursday from TDC participants concerned that the lawsuit could halt the TDC/TRS transfer process. “It’s just caused such a huge panic,” Lambright said. “We’ve been overwhelmed by calls the lawsuit engendered.”

In 2005, Charleston lawyer Jim Lees blocked a plan to have all TDC participants transfer into TRS, on the grounds it would have amounted to an illegal taking of assets from those who wanted to stay in the 401(k) style plan.

Webb said the current class action lawsuit does not attempt to halt the transfer process.

If the TDC/TRS transfer proceeds, which requires that a minimum of 65 percent of TDC participants elect to transfer, damages will be based on the buy-in costs to obtain full TDC pension benefits. If the transfer passes – and a preliminary count may not be available until later this month – buy-in costs could vary from a few thousand dollars to as much as $40,000 to $50,000, depending on transfer election percentages and how close an individual is to retirement age.

TDC participants who transfer to TRS but do not buy-in would receive a pension equal to 75 percent of normal TRS benefits.

AIG corporate spokesman John Pluhowski could not be reached for comment Thursday.

Source/Writer:

The Charleston Gazette

Staff writer: Phil Kabler

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TEACHER FUND TARGET OF SUIT

A former West Virginia delegate and the Variable Annuity Life Insurance Co. are named as defendants in lawsuit filed by members of the Teachers’ Defined Contribution Plan. And the West Virginia Consolidated Public Retirement Board soon could be added to the list of defendants in the suit Charleston plaintiff’s attorney Harry Bell filed in Marshall County Circuit Court this week.

Bell said several Marshall County teachers believe they were tricked into losing thousands of dollars upon switching to the DCP from the Teachers Retirement System, a defined benefit plan, in the early 1990s.

“Teachers and school employees in this state have been mistreated, and this is just not fair. They have all lost thousands and thousands of dollars and need to get their money back,” Bell said.

Bell’s complaint alleges that former Delegate Ramona Cerra, D-Kanawha, acted as an agent of VALIC and its parent company, American International Group Inc. on the grounds of Marshall County Schools in the early 1990s. Investing in VALIC annuities was one of the options teachers were given with the DCP the state Legislature established in 1990.

“She told these teachers that they had to leave the old Teachers Retirement System and enter the Defined Contribution Plan because the state was going bankrupt. As a former legislator and respected member of the community, these teachers trusted her,” Bell said of Cerra.

Bell said that while Cerra earned “exorbitant, front-loaded commissions” on her sales of the VALIC annuities, the teachers lost most of their money for retirement.

Cerra could not be reached for comment Thursday.

Bell said he is looking for additional plaintiffs in the suit that he hopes Circuit Court Judge John T. Madden will declare as class action.

“We have also given a 30-day notice to the state agency overseeing this to let them know that we fully intend to sue them as well because they are just as much at fault for this fiasco,” he said.

Anne Werum Lambright, executive director of the retirement board, confirmed she received the notice that is required before filing suit against a state agency.

“I cannot comment on this yet because I have yet to see the complaint,” she said Thursday.

Bell believes Cerra and others intentionally misrepresented the amounts the teachers could earn by investing in the annuities.

“Had they (teachers) maintained their previously established accounts and not switched to defendants’ annuity, they would have earned significantly more over time and up to their retirement,” he wrote.

Bell claims the defendants engaged in an “ongoing, pervasive, intentional, wanton, illegal and systematic pattern and practice of misrepresenting the annuity.”

“Defendants combined their skill, knowledge, resources, contacts and other attributes and characteristics in order to engage in the single business enterprise of selling the annuity to plaintiff and class members by the use of misrepresentation and deceit,” he continued.

Representatives of AIG and VALIC did not return calls Thursday seeking comment regarding the lawsuit.

While Bell said the final amount sought in the lawsuit is yet to be determined, the goal is to have members of the DCP who switched from the TRS receive the amount they would have received if they would have remained in the TRS. Bell said he would like to see the case settled out of court but does not think the defendants will go along with that idea.

“Right now, we are probably about two years away from actually going to trial in this case. We do have every confidence that officials in Marshall County will give us a fair trial when the time comes,” he said.

Source/Writer:

The Intelligencer: Wheeling News-Register
Staff writer: Casey Junkins

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LAWSUIT CLAIMS FRAUD IN TEACHER RETIREMENT PLAN

Seeking class-action status, the lawsuit contends enrollees were steered toward an investment that performed only slightly better than some savings accounts, and that some of them had wrongly been lured away from a traditional pension. The lawsuit targets an investment option known as a VALIC annuity that was offered to enrollees in the Teachers’ Defined Contribution plan. The plan allows members to manage investments to generate future retirement benefits. Enrollees claim they were duped into selecting the VALIC annuity.

“VALIC engaged in a systematic scheme of hiring agents, with whom the teachers, school service personnel and professional staff were familiar,” the lawyers filing the suit said in a news release. “We believe many of the representations made by these VALIC agents were not factually based and were clearly fraudulent in character.”

The annuity also is blamed for the poor returns suffered by many TDC investment accounts. Thousands of plan enrollees are trying to join another state-run pension program as a result. That program, the Teachers’ Retirement System, offers a guaranteed benefit based on years of service and final salaries. The statement from the Bell & Bands and Webb law firms cites members of that plan who were lured into leaving for TDC.

“Those employees who transferred their funds into the VALIC annuities have had far less returns on their investment than they would have had realized in the ‘old’ TRS,” the lawyers’ release said.

VALIC is now part of insurance giant AIG.

“VALIC offered a fixed annuity product to the plan and we are confident that we met the obligations we were contracted to provide,” AIG Retirement Services spokesman John E. Pluhowski said Thursday night in a statement. “We are proud to be of service to West Virginia educators.”

He declined further comment on the lawsuit.

The lawsuit filed Monday in Marshall County Circuit Court names as defendants AIG Retirement, its VALIC subsidiary and a half-dozen VALIC sales agents. The defendants also include as-yet-unidentified individuals who also allegedly sold TDC enrollees on the annuities.

After meeting with AIG officials last month, Gov. Joe Manchin suggested the company pay some of the potential costs of moving TDC members into the pension plan. AIG balked at accepting such responsibility and defended its track record with TDC.

The state’s Consolidated Public Retirement Board, which oversees TDC, is not named in the lawsuit but was criticized in Thursday’s release. Board Executive Director Anne Lambright said the lawyers behind the suit informed her Wednesday that they plan to sue the board as well. The lawsuit names a single plaintiff, and the lawyers said they continue to sign up possible class members.

Under a process that ended Monday, TDC members could elect to join the Teachers’ Retirement System. But the voluntary transfers hinge on at least 12,343 enrollees, or 65 percent of eligible members, making that choice. The retirement board expects certified results from the transfer election by the end of the month.

The Associated Press recently analyzed TDC’s performance since it opened in 1991, and found that enrollees have invested more of their funds into VALIC annuities than any other option — as much as three-fourths of all its funds. The AP review also suggests that the annuities’ returns lagged behind other investment options, particularly since 2000.

For the last three years, the annuity has delivered only its 4.5 percent guaranteed return. Complaints about poor returns and spotty help from the program’s managers prompted the Legislature to close TDC to new enrollees in 2005.

Source/Writer:

Charleston Daily Mail
By: The Associated Press

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FORMER LEGISLATOR, OTHERS SUED OVER TEACHER RETIREMENT PLAN

On behalf of teacher Cheryl Dougherty, Charleston attorney Harry Bell proposed a class action against Cerra, five other individuals and insurer American International Group. Bell wrote in the complaint filed May 12 in Marshall Circuit Court that he would add the West Virginia Retirement Board to the suit.

Bell alleges that Cerra and the others harmed school employees by persuading them to switch from the Retirement Board’s old defined benefit plan to a new defined contribution plan. He wrote that Dougherty found out in an April letter from AIG that her decision hadn’t worked out as well as she had expected.

Dougherty “detrimentally relied on the misrepresentations of defendants as they were actually losing retirement funds with defendants’ annuity, and/or that defendants’ annuity would in reality perform significantly below the levels” guaranteed by the defendants.

“Had they maintained their previously established accounts and not switched to defendants’ annuity, they would have earned significantly more over time and up to their retirement,” Bell wrote.

A significant number of system members may not yet know that they have suffered damages as a result of misrepresentations, he wrote.

AIG’s lawyer gave system members an option to switch back, he wrote, “but at significant personal cost.”

He alleged that AIG recruited and trained “undisclosed, prominent representatives” to misrepresent characteristics of the annuities. He called the annuity “an exorbitantly commission-driven, front-loaded brokerage fee annuity.”

Cerra met with school employees at Dougherty’s place of work, Bell wrote, “at which time said misrepresentations were made.”

“Cerra led plaintiff to believe Cerra was a representative from the WV Retirement Board,” he wrote.

Cerra stated that the teachers’ retirement system was in grave danger and there would be no retirement by the time she reached the age 55, Bell wrote. Cerra stated that a new system would allow employees to retire with even better benefits than those who remained in the old plan.

As a result of Cerra’s “pressure tactics” Dougherty purchased an annuity, Bell wrote. In return, he wrote, Cerra received exorbitant commissions.

Bell also accused John Cook, Greg Garrett, Roland Rich, George Edwards, Clarence Burdette and 30 John Does of misrepresentations. He proposed to certify a class of “all system members to which representations were made regarding the annuity and who purchased or transferred funds to the annuity.”

He wrote, “Defendants combined their skill, knowledge, resources, contacts, and other attributes and characteristics in order to engage in the single business enterprise of selling the annuity to plaintiff and class members by the use of misrepresentation and deceit.”

He wrote that they “engaged in a joint venture to obtain significant economic gain to the detriment of plaintiff and class members.”

William Bands and Tim Yianne of Bell and Bands also signed the complaint, as did former legislator Rusty Webb of the Webb Law Firm in Charleston.

Source/Writer:

The West Virginia Record
Writer: Steve Korris

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