W.Va. eyeing lawsuit in wake of economic downturn
CHARLESTON, W.Va. (Legal Newsline) - West Virginia Gov. Joe Manchin is investigating the possibility of taking legal action against major national investment firms whose failures resulted in a multi-million dollar loss to the state's portfolio.
"We've suffered losses in our portfolio because of their inability to operate," said Lara Ramsburg, Manchin's spokesperson. "While it's not a significant amount of money, it's still a loss."
The Lehman Brothers is perhaps the best example of a company that may face legal action because it was one of the firms in which the state had stock, Ramsburg said.
The firm, which filed for bankruptcy, represents one-tenth of one percent of a loss to the state's portfolio, Ramsburg said.
Other firms potentially facing legal action include Merrill Lynch, which was acquired by Bank of America, and AIG, which was taken over by the federal government.
State officials are in the process of determining whether the state's portfolio faced losses in the two firms, Ramsburg said.
West Virginia purchased investments in various firms for $95.2 million, but the value of the investments had decreased by almost $23 million by Aug. 31, according to The Associated Press.
Federal government and state officials are investigating the failures to determine whether executives could have done more to save the companies.
"It's one thing if you do the best you can, and the company goes under," Ramsburg said. "But if you did fine while the company went under, somebody needs to be held accountable for that. You don't want anybody to take advantage of you or your state's assets."
West Virginia does not face a large loss to its portfolio because of its diverse investments, Ramsburg said.
"We're in better shape than most states, and we have the ability to weather the storm," she said.
But even a small loss is a loss, she said.
"It wasn't so much a large percentage of the portfolio, but more the principal of the matter," she said.
Already, one public pension fund has filed suit against AIG directors and executives, according to The Associated Press.
The City of New Orleans Employees' Retirement System sued the insurance company on Sept. 17, seeking to recover "its staggering losses from its exposure to and grossly imprudent risk-taking in the subprime lending market."
The Investment Management Board is responsible for managing West Virginia's multi-billion dollar portfolio, a majority of which is used to pay public employee pension funds. It also funds retiree health benefits, workers' compensation, insurance for cities and counties and prepaid tuition programs.
Ramsburg is not sure when a suit could be filed.
"We're reviewing it as quickly as we can," she said. "I don't have a timetable, but I do know that it is being looked at."