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Teachers union could pay $14M to schools under settlement

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The state’s largest teachers union and its national parent organization have agreed to pay $14 million under a tentative settlement announced Tuesday morning by Indiana Secretary of State Connie Lawson and Indiana Securities Commissioner Chris Naylor.

Those funds would be paid to 27 Indiana school corporations whose employees contributed premiums to the now-defunct Indiana State Teachers Association Insurance Trust for medical insurance.

A 2009 lawsuit brought by the Securities Division of the Indiana Secretary of State claimed that the ISTA Insurance Trust had sold the schools unregistered securities, commingled the funds of its medical and long-term disability insurance plans and falsified reports to the schools.

Those allegedly falsified reports claimed the schools had amassed $27 million in excess premium payments, which were being held in “claims stabilization reserves” to offset future premium increases.

In reality, however, the ISTA Insurance Trust began using those claims stabilization reserves to pay off claims being generated by members in its long-term disability insurance plan, according to the lawsuit filed in December 2009 by Naylor.

“It had many of the characteristics of the run-of-the-mill Ponzi schemes that we see,” Naylor said. “Just the dollar amounts were bigger.”

The settlement was hammered out July 3 during an all-day conference in federal court in Indianapolis. But it is still pending approval by the school boards of the 27 school districts.

Once finalized, the settlement calls for ISTA and its parent organization, the National Education Association, to write a check for the $14 million within 10 days. The money will be paid to the Secretary of State’s office, which will distribute it to the school corporations.

“We are confident that we have a majority of the schools in agreement,” Lawson said. She added that while the state believes ISTA and NEA should pay back all $27 million, the settlement would avoid the years-long legal battle that would be necessary to win such a judgment against them.

Mark Shoup, a spokesman for Indianapolis-based ISTA, said the teachers union hopes the settlement puts its troubles with the insurance trust behind it.

"It allows us as ISTA, the teachers organization, to really move forward and focus on our mission, which is being the voice of teachers," Shoup said.

The settlement will pay each school corporation roughly 52 cents for every dollar they were told was being held in reserve for them at the ISTA Insurance Trust. In 2009, the NEA offered to pay the schools between 25 cents and 33 cents on the dollar.

"We think it's more than fair," Shoup said. "At this point, we think it's something everyone can live with."

The settlement includes no fees for the legal work performed by or on behalf of the Secretary of State’s office, Naylor said. Rather, the outside attorneys the state hired for the case were paid out of fines from violators of Indiana’s securities laws.

Letters were mailed on Thursday informing the school districts of the settlement terms, which also require the school districts to release ISTA and NEA from any further legal claims. If any of the 27 school corporations does not agree to the settlement, then the case is set to proceed to trial Oct. 28.

The ISTA and NEA sought multiple times to dismiss the case or to excuse the NEA from liability. But Judge Sarah Evans Barker ruled against those motions, allowing the case to proceed to trial.

The ISTA Insurance Trust, launched in 1985, at one time provided health insurance to more than 7,000 school employees around the state and long-term-disability coverage to nearly 30,000 others. It offered its plans as a low-cost alternative to school employees—a strategy it could maintain so long as returns from its investments were good.

The collapse of the ISTA Insurance Trust was the result of poor investment decisions that were then exposed by the global recession and financial meltdown of 2008 and 2009.

From 2004 to 2008, the ISTA Insurance Trust increased the percentage of its assets invested in “alternative investments,” which tend to be hard to value and hard to sell, from less than 20 percent to more than 93 percent.

From the fall of 2007 until the spring of 2009, the value of the trust’s assets fell by 55 percent, leaving it $67 million short of its liabilities, according to a special report prepared in May 2009 for the Indiana Department of Insurance.

The plunge was accelerated because the trust had to sell off some of its liquid assets to pay health and disability claims of its members.

"That is just a recipe for disaster," said Jim Atterholt in 2009, who was at the time Indiana’s commissioner of insurance.

The settlement also brings to a close an ugly chapter for the ISTA. The revelation of the losses in its insurance trust led to the resignation of its longtime executive director, Warren Williams, and the effective takeover of the state organization by its parent, the NEA.

Also, some cited the financial turmoil for ISTA’s inability to stop Republicans from gaining control of the state Legislature in the 2010 elections and then passing a series of sweeping education reforms in the spring of 2011.

The Secretary of State’s office also filed suit against David Karandos, the financial adviser for the ISTA Insurance Trust, who advised the numerous investments in private equity and hedge funds.

Karandos, who worked for UBS and Morgan Stanley Smith Barney during his time as the ISTA’s adviser, was a close friend of Williams. The two vacationed together, and Karandos even introduced Williams to his current wife.

In March 2012, Karandos agreed to a fine of $50,000 and a suspension of his broker’s license for 75 days.

Since June 2012, Karandos has worked as a mortgage loan officer for two different lenders, Cross Country Mortgage and then GVC Mortgage, according to his LinkedIn page. Also, since June 2012, Karandos has operating his own financial advising business, which his LinkedIn page called Private Client Advisors/ DMK Financial Services Group.

The two Wall Street firms that employed Karandos have reached separate settlements with the Securities Division. UBS in May 2011 paid a $450,000 fine and $227,000 in investigative costs, and Morgan Stanley in January 2012 paid a $100,000 fine and $110,000 in investigative costs.

 ISTA last year reached its own settlements with Morgan Stanley and UBS. But the amounts the firms agreed to pay have not been made public.

Story originally published at IBJ.com.
 
 

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  1. Am I the only one who sees that the City is essentially giving away the MSA site AND giving millions to build new buildings on the site when this site would be the perfect place for the Justice Complex? Across from City-County, check; keeping it centrally located, check, etc. It's my understanding that the GM site must be purchased by the City from Motors Liquidation Company. STOP WASTING WHAT WE ALREADY HAVE AND OUR TAX DOLLARS! The Ballard Administration has not been known for it's common sense...never voted for him and never will!

  2. This guy sounds like the classic molester/manipulator.

  3. Louis D. Brandeis was born in 1856. At 9 years of age it would have been 1865. The Brandeis family did not own slaves. My source Louis D. Brandeis: A Life, by Melvin L. Urofsky.

  4. My name is Matthew Lucas Major, I recently went through a jury trial in Bloomington , In. It was the week of Feb 19-21. Although I have been incarcerated since August 5, 2014. The reason I 'am writing to you sir is on the 21 of February the jury came in with a very excessive and wrongful verdict of guilty on 6 child molesting charges against my daughter who was 9 at the time I was accused. I also had 2 other Felonies one of Intimidation and 1 of Sexual Vicarious Gratification. Judge Marc Kellam on the second day of trial gave me a not guilty on those 2 felonies. The jury was sent out during that time and when brought back Judge Kellam told them to not concern themselves with the 2 Felonies that he ruled on them. They were told to not let evidence they had already heard influence there verdicts. I never in my life touched any child sexually and definitely not with my own daughter. When I was arrested Detective Shawn Karr told me I would be convicted guilty just on my daughters word even without evidence. That's just what happened. my public defender did me so wrong he never once proved to the court and jury all the lies the child told, and Jeremy Noel my public defender could of proven the lies easily. The stories in Serenity's depositions and Forensic interview changed and were not consistent as Prosecutor Darcie Fawcett claimed they were. Yet my attorney never mentioned that. The facts that the child accused me of full penetration in her vagina and rectum was proven lies. Doctor Roberta Hibbard of Riley hospital in Indianapolis confirmed Serenity's hymen intact, no scars, no tearing, no signs of rape to her. Yet my attorney didn't use that knowledge . the DNA was all in my favor. I tell you I will spend my entire life in prison going through rape and beatings etc. even Judge Kellam abused his authority by telling the jurors to listen and believe what the prosecutors side in evidence like my daughters testimony. In one interview with the detectives my daughter got flustered with her mom and said on camera " I'm saying what you told me to mom"!! Yet Mr. Noel said nor did anything to even resemble a defense attorney. Judge Kellam allowed edited version of a taped conversation between the child and her mother. Also Judge Kellam allowed the Prosecutor too bring in to my case a knife found under my seat, the knife wasn't part of my case. She was allowed by my attorney and the judge to put a huge picture of it on the screen and huge picture of my naked privates in a full courtroom and open court. Ms. Fawcett says to jury see how easy Mr. Major could reach the knife and cut his Childs throat. Even though I had no weapons charge against these cases. This gave the jurors prejudice thought against me thinking I threatened her with that knife and how scared she would of been knowing i could get it and kill her. On my sentencing court March 19, 2014 my public defender told Judge Kellam he wish to resign from being my attorney and wished for the court to give me outside council to file a error to trial or appeal. We were denied. Now after openly knowing my public defender don't want to represent me he has to. Well when as parents we make our kids clean a room when they really don't wish to, well the child will but don't mean she will do a good job, that's where I'm at with Mr. Noel. please dont ignore mine and my families pleas for your help . we have all the legal proof you could need to prove Im innocent. Please dont make my spend years in prison innocent when you can fix this wrong. Im not saying Im a perfect man or that I was a perfect dad to my 2 children none of us are. Ive made some bad choices in life and I paid for them. But I didnt ever touch or rape my daughter . I love my children with all my heart. And now through needing attention and a ex-wife who told my granny several times she wish she could put me in prison to get me out of their lives. Well my ex finally accomplished her goal. Sad part is she is destroying our daughter with all this horrific lies and things she taught my daughter to say. My daughter will need therapist to ever hope for a chance of a normal life after what she had done to her by her mom and their side of the family. My daughter told everyone even on stand she had a dream months before i supposedly molested her in this dream I was molesting her and when I finally did it matched her dream perfectly. She admitted to watching movies about little girls being molested and watching U-Tube videos about child molesting all before it happened supposedly to her. Doesn't that sound very unusual that a non molested 9 yr old would need to know so much about being molested? The only reason I could think a 9 year old would need so much information is to be prepared to know what to say and be able to say how it felt what took place etc.. So when questioned by authorities she would be prepared. And there again sir if a parent is pre grooming a 9 year old child she would need intimate details . Like telling her daughter about a couple moles on my private area. The child admitted to sneaking my cell and looking many many times at nudes of me and my girlfriend even one where my penis was entering my girlfriends vagina. In that picture my moles are obvious. Yet when prosecutor showed everyone in court my privates and pictures of the moles she said the only way the child would know about them is if she saw them for herself. My attorney once again said nothing about the pictures my child saw. Or could a ex-wife be able to describe my moles to help her case against getting rid of me? I beg you help me. This is my very existence. Ive lost everything , a good job, a wonderful girlfriend, my freedom, but worse thing Ive lost is my children. They were my reason to get up every morning and strive to be better. The wonderful bond I had with my Serenity is gone. After this I would be afraid to even hug her for fear of what next can they do to me. I'm not afraid to tell you I sit here in this cell and try to hold back my tears. Everyone knows you cant show weakness in prison. My life has already been threatened here at Wabash Valley Prison. After only 3 days of arrival. I was tricked into signing a waiver now Im in G Block General Population with 6 child molesting felony charges. Mrs. Hart as a 18 year old I almost died hooked to machines in hospital almost 1 month and now I know that fear was childish compared to this . I cant help but put emotions in this, after all Mrs. Hart Im human and God help Me I never been more afraid in my life. I didnt hurt my little girl I didnt touch her sexually. As much as it shreds me and fills my mind what Im facing I worry more about my mom and granny because of their great love for me mam they are suffering so deeply. I aint done this things but my loved ones suffering right along beside me and If you take my case you will be in essence freeing them also. I sent momma this letter and asked her to email it to you. I'm scared I have been done so unjustly by our legal system and I need you to fix this and give me freedom. I ask you please don't just ignore my pleas. Here in America its nice to be able to trust our legal justice system, well they destroyed my and my loved ones trust in our justice system . And I'm trusting in You !!! My entire family is suffering this nightmare with me. My 77 year old granny had a stroke and isn't doing so well. My single mother that raised 3 kids alone is dying from Lupus and since my arrest has stayed so sick and weary. Our lives torn to peices by a government I was taught I could trust in. my momma has tried so many innocent project and wrongfully accused and cant get anywhere. please please help me. A quote from the late Nelson Mandela: To be free is not merely to cast off ones chains, But to live in a way that respects and enhances The Freedom Of Others. I have Faith in you and your clinic to cast my chains off and give me freedom I do deserve as a wrongfully accused Man, son, brother, father, friend. Matthew Major DOC# 246179 Cause # : 53c02-1308-FA-000779 God Bless you. Please contact me with your decision so I know you made a life changing decision for me , just please at least write me so I know you care enough about your citizens to respond to cries for your help. You can speak openly with my mother Charlotte Spain (828) 476-0406: 71 Lakeview Dr. Canton, NC 28716 Thank You Matthew Major I know yall get thousands of request and inmates claiming innocence, and each person who are innocent deserve to have organizations like yours willing to fight for them and I give yall so much Thanks and I thank God everyday yall are out there caring enough to help free the innocents. Since discovering firsthand how easily lives and families can be destroyed by Poor Defense attorneys not doing their job . And Prosecutors allowed to do as they please in court

  5. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

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