Twelve years ago, the CNMI Retirement Fund attempted to file a Chapter 11 bankruptcy petition in April 2012; however, its petition was dismissed.
Despite compelling legal and practical arguments presented by the debtor’s counsel and retirees, U.S. Bankruptcy Judge Robert J. Faris stood firm in his decision to dismiss the Chapter 11 petition filed by CNMI Retirement Fund. He expressed his dismay at the treatment meted out to both the pension fund and its retirees, labeling it as “shameful.” Faris, while acknowledging the gravity of his decision, emphasized that it was not a victory for anyone, but rather a disaster for all involved.
Faris’ rationale for dismissal stemmed from his interpretation of bankruptcy eligibility criteria set by Congress. He viewed the Fund as an “instrumentality” of the CNMI government, thereby precluding it from seeking bankruptcy protection. Though arriving at his decision with reluctance and sadness, Faris emphasized the need for a more peaceful resolution to the Fund’s financial woes.
In the aftermath of the dismissal, discussions ensued regarding the retention of professionals and the possibility of an appeal. While parties weighed their options, reactions varied among stakeholders. Some expressed agreement with Faris’ ruling, recognizing the need for alternative approaches to address the Fund’s challenges.
As the dust settled on this chapter, retirees redirected their efforts, and rallied behind Betty Johnson’s case in federal court as she sought receivership for the pension fund. With a Fund board incapacitated to make any action owing to unfilled vacant seats, and consequently not having a quorum to make a decision, the court appointed a trustee ad litem, but not a receiver, until the case was finally settled in October 2013. The retirees reluctantly agreed to a temporary 25% pay cut, with the enforcement of a $779 million judgment hanging like a sword of Damocles over the government should it fail to meet its obligations to the retirees.
The CNMI government had pinned its hopes on the casino industry to cough up the funds it needed to fulfill its financial obligations to the pension fund. The license fees paid by Best Sunshine to the government and remitted by the latter to the Settlement Fund, helped extend the life of the settlement fund so retirees could continue to receive their benefits. The fund had earlier been warned by experts that absent a heft infusion of cash, it would run out of money by 2014.
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