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New Jersey Plans to Sue Companies Over Losses to Pension Funds

By: David Kocieniewski

New York Times, August 7, 2002

TRENTON, Aug. 6 — New Jersey plans to sue several major companies now accused of corporate mismanagement, the state attorney general announced today, saying that misleading accounting practices and bad decisions by executives have cost the state's retirement system more than $1 billion.

The state's pension funds, which pay the retirement benefits of 600,000 state employees, invested aggressively during the Wall Street boom of the 1990's and were worth $94 billion two years ago. Since the stock market began its decline, that value has dropped to $73 billion, and an analysis by the attorney general's office found that $1 billion of those losses came from companies that have been accused of overstating their earnings or other forms of corporate malfeasance.

"The state has incurred huge losses that can be attributed in many instances to corporate mismanagement, misconduct or greed," the attorney general, David Samson, said in a statement. He declined to identify the companies but said they would be named when the legal papers were filed.

Several other states are considering class-action suits to recover pension fund losses. The New York State Common Retirement Fund has said it plans to sue WorldCom after reporting a $300 million loss, the biggest loss the $112 billion fund has ever had.

Peter Aseltine, a spokesman for Mr. Samson, said that New Jersey would hire lawyers to handle the case, and that they would be instructed to focus on companies already being sued for allegedly misleading investors.

Mr. Aseltine said the attorney general's office had identified at least 26 companies now being sued for malfeasance which accounted for $10 million each in losses to the state pension fund. One company alone accounted for $250 million in losses in the fund, Mr. Aseltine said.

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