[R75] Our local schools deserve better (12/6/2013)

Friday, December 6, 2013

Start Date: 12/6/2013 Start Time: 12:00 AM
End Date: 12/6/2013 End Time: 11:59 PM

As you may have heard by now, Indiana Secretary of State Connie Lawson announced on Tuesday that her office had finalized a settlement of a federal securities fraud lawsuit. The $14 million lawsuit accused the Indiana State Teachers Association (ISTA) and the National Education Association (NEA) of defrauding Hoosier schools out of over $27 million. 

This announcement is a partial victory for schools across Indiana including one of our own, the Warrick County School Corporation, which will be receiving $376, 585. 22. This total equates to about 50 cents for every dollar they lost. The ISTA and NEA have ten days from Tuesday to pay this money to the Secretary of State’s office who will then distribute it to the schools in a manner we have been assured will be expeditious. This took almost four years to litigate, and it is important that the public knows not only the end result, but also how and where the problem started. 

Almost 30 years ago, the ISTA Financial Services Corporation created the ISTA Insurance Trust to manage health care and disability liabilities. In this case, the ISTA and NEA were accused of selling healthcare plans with benefits, which were unregistered securities, to 27 school corporations in Indiana. With certain exceptions, selling unregistered securities is considered a felony offense. 

The ISTA and NEA then used the money from the health plans for their own benefit to cover funding shortfalls in their long-term disability plan. This meant the money was never invested on the school’s behalf to offset future health care costs as was promised. It was also alleged that ISTA continuously issued phony financial statements to schools misrepresenting investment fund balances. 

Because our Secretary of State’s office only has the authority to file civil suits and cannot file a criminal suit, she turned this issue over to the United States’ Attorney General’s office as well as the FBI; however, the U.S. Attorney General declined to take up the case. As a result, the issue was never allowed to play out through the criminal justice system, and we will never fully know if a criminal act was committed or by whom. In essence, no one is being held accountable for this deliberate mismanagement of funds, and I find that troubling. 

I commend Secretary of State Connie Lawson and former Secretary of State Todd Rokita, now Congressman, for their due diligence on this issue, which has enabled our school system to recover a portion of the money they are owed. This settlement has been a long time coming. 

With this now settled, I still firmly believe that the ISTA and NEA should pay every penny that they mismanaged back to the school corporations and teachers. It’s simply the right thing to do, especially from organizations that have pledged to do work in their best interest.

The most important thing moving forward is to work towards a more permanent solution that ensures this does not happen again – our teachers deserve as much. I am a firm believer in our state’s education system and that we need to be doing everything we can to culture the best learning environment. This takes an all-in effort from administrators, teachers, students, parents, local communities and statewide organizations. This is why I plan to look into what we can do legislatively to make sure that this doesn’t happen again, and so that Hoosier students can realize and create a better future for our state.