In Supreme Court, Pension Funds Join Battle on Fraud
A U.S. Supreme Court case about corporate fraud may not seem like a school law matter. But the case the justices heard on Oct. 9 attracted the attention of several of the nation’s largest teacher-retirement funds.
In Stoneridge Investment Partners v. Scientific-Atlanta Inc. (No. 06-43), the high court must decide whether federal securities laws permit private shareholders to sue the business partners of companies engaged in fraud.
The California and New York state teacher-retirement funds, as well as some other large state pension funds, filed or joined friend-of-the-court briefs on the side of shareholders. The shareholders are seeking to hold two big companies that were the business partners of Charter Communications Inc. liable for allegedly helping the St. Louis-based cable-TV company in a fraudulent scheme that helped inflate its cash flow in 2000.
The teacher-retirement funds note that they have become some of the most active institutional investors in trying to improve the integrity of publicly traded companies in the wake of Enron and other recent high-profile corporate-fraud cases.
“The membership of our organization is highly attentive to these frauds and are concerned that ultimately it has an impact on their pensions,” said Jack Ehnes, the chief executive of the California State Teachers’ Retirement System. The teachers’ system, based in Sacramento, has some 800,000 active and retired members and assets of $171 billion, and is the second-largest public-pension fund in the country.
Meanwhile, Wayne T. Schneider, the general counsel of the New York State Teachers’ Retirement System, expressed similar views.
“We’re concerned with the integrity of the stock market,” he said. “There are some risks we can’t control. But being lied to and defrauded [by companies] is not one of the risks we care to take.”
The Albany-based fund has more than $100 billion in assets and serves nearly 400,000 active and retired members, excluding the New York City school system, which has its own retirement funds and also joined a brief in the case.
A ruling is expected by the end of the court’s term next June.
Vol. 27, Issue 08, Page 18