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WorldCom collapse cost state pension funds millions

USA Today

June 27, 2002

ALBANY, N.Y. (AP) — California's state pension fund has lost around $565 million on WorldCom-related investments, and New York's fund is close behind with a loss of about $300 million, the largest single loss in the fund's history, state aides said Thursday. The nation's two largest funds aren't alone: Michigan's lost about $116 million, and Florida's lost between $85 million and $90 million.

The California Public Employees Retirement System, the nation's largest, has about 23 million shares of WorldCom stock, as well as bonds linked to WorldCom.

Still, Spokesman Brad Pacheco said $565 million is a relatively small amount for a fund worth $150 billion.

Michigan's pension fund is worth about $45 billion, and Florida's is worth $90 billion. Florida's fund has already been hobbled by an estimated $300 million loss on Enron stock.

Robert Leggett, asset manager for the Kentucky Retirement Systems, said what started as $8.4 million in WorldCom stock there was worth only about $492,000 Thursday morning. But he noted, "Until you actually sell it, you haven't lost it."

New York Comptroller H. Carl McCall, the trustee of the $112 billion state pension fund, said its private money managers were duped by the communications giant. He said he was considering seeking lead plaintiff status in any court action against the corporation.

WorldCom reported earlier this week that $3.9 billion was wrongly listed on its books as capital expenses in 2001 and 2002, meaning WorldCom may have actually lost millions of dollars when it reported profits. The news sent stocks plunging and prompted the Securities and Exchange Commission to file fraud charges.

Before WorldCom's announcement, McCall said the fund had a positive rate of return of 2.8% for the fiscal year ending March 31.

"Every major investor in the nation was heavily invested in WorldCom," said McCall spokesman Steven Greenberg. "They were one of the largest corporations in America."

The New York state pension fund has sustained some major losses over the past year, including $75 million on Global Crossing investments; $58 million on Enron; and about $5 million on Adelphia Communications.

McCall, the fund's trustee, is running for governor. His opponent, former federal Housing Secretary Andrew Cuomo, blamed questionable investments by McCall for the WorldCom losses.