In 2012 I had a front-row seat as the CNMI Retirement Fund tried to file for bankruptcy.
In April, U.S. Bankruptcy Judge Robert J. Faris threw out the petition. The Fund, he ruled, was an “instrumentality” of the government and could not seek protection. He called the treatment of the Fund and its retirees “shameful.” Nobody won.
Retirees turned to Betty Johnson’s federal suit to put the Fund in receivership. A court-appointed trustee ran it until the case closed in October 2013. Retirees took a 25% cut; the government faced a $779 million judgment if it broke the deal.
Casino license fees from Best Sunshine then flowed into the settlement fund and kept benefits going, for now.
As a reporter covering the CNMI Retirement Fund's attempt to file for Chapter 11 bankruptcy protection 12 years ago, I was in the front-row seat to the retirees' plight riddled with legal twists and turns. In April 2012, the Fund's petition faced dismissal despite fervent arguments from both its counsel and retirees. U.S. Bankruptcy Judge Robert J. Faris, unwavering in his decision, labeled the treatment of the pension fund and its retirees as "shameful," expressing his disappointment at the outcome. His ruling, while rooted in legal interpretation, left no side victorious, marking a collective setback.
Faris' rationale hinged on Congress's criteria for bankruptcy eligibility, deeming the Fund an "instrumentality" of the CNMI government and thus ineligible for bankruptcy protection. Though Faris arrived at his decision reluctantly, he emphasized the necessity for a more amicable resolution to the Fund's financial challenges.
In the aftermath, discussions swirled regarding the retention of professionals and the potential for an appeal, sparking varied reactions among stakeholders. Some concurred with Faris, acknowledging the imperative for alternative strategies to address the Fund's woes.
As the dust settled, retirees pivoted their focus, throwing support behind Betty Johnson's federal court case seeking receivership for the pension fund. With the Fund board incapacitated by vacant seats, a trustee ad litem was appointed by the court until the case concluded in October 2013. Reluctantly, retirees accepted a temporary 25% pay cut, with the CNMI government amenable to a looming $779 million judgment if it failed to keep its end of the bargain.
The local government, banking on the casino industry, hoped to alleviate its financial strain. Best Sunshine's license fees injected much-needed funds into the Settlement Fund, prolonging retiree benefits. Experts had previously warned of the Fund's imminent depletion without substantial cash infusion, a prophecy averted, at least temporarily, by the casino revenues.
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