$14-million Settlement Brings More Dispute
December 3, 2013 — The Indiana State Teachers Association (ISTA) says it agrees with its financial payment to settle a lawsuit with the State of Indiana, though it doesn’t agree with the Secretary of State’s characterization of it.
Secretary of State Connie Lawson announced a finalized settlement today in a federal securities fraud lawsuit with the ISTA and the National Education Association (NEA). She says a $14-million deal will settle litigation that accused ISTA and NEA of selling health plans with benefits, which were unregistered securities, to 27 school corporations, using proceeds to “cover their own funding shortfalls and for risky investments instead of investing on the schools’ behalf as promised.”
While Lawson’s announcement says ISTA and NEA were, “defrauding Hoosier schools out of over $27 million,” ISTA says the state agreed to the settlement to expressly recognize that neither ISTA nor NEA admitted any liability in the case.
ISTA says, “No members’ dues were used to fund this settlement. To protect the interest of school employees, ISTA and NEA funded litigation to sue those actually responsible for the collapse of the ISTA Insurance Trust. That litigation generated settlements in excess of $14 million, which are the sole source of the funds being used to resolve the state and school districts’ cases.”
The $14-million settlement will go to the school corporations to compensate for their lost investments.
Lawson says, “In the next ten days, school corporations will see a recovery four years in the making. Teachers and administrators alike can finally put this lawsuit behind them. They will receive 50 cents on the dollar for the money ISTA and NEA misappropriated. We strongly believe our case supported full repayment by ISTA and NEA, but we knew they were willing to spare no expense on endless litigation. This settlement gets these school corporations a much needed, immediate financial boost.”
Lawson asserted, “ISTA took money from one fund to pay claims and cover deficiencies of another, then issued falsified statements to clients to create the illusion of funds. This is a classic example of a Ponzi scheme.”
ISTA says that Lawson, “has decided for political reasons to misrepresent the resolution of this case.”
ISTA president Teresa Meredith says the organization is grateful that the settlement is fair to school employees involved, “It is important to note that, contrary to what the Secretary of State’s press release might suggest, there never was any allegation in the lawsuit that any funds received from school districts had been used by ISTA or NEA for their own benefit.”
Lawson’s announcement said, “ISTA and the NEA have repeatedly tried to play the victim and have made multiple attempts to dismiss the case. The truth is they intentionally misled those they claim to support and protect to cover their own shortfalls and to invest in risky securities for their own benefit. They have a moral obligation to repay the full amount.”
The Crown Point School Corporation gets the single largest claim from the settlement, at $3,040,851.39. See the list of school corporations involved: Indiana-ISTA settlement Victims and Amount Recovered 12.3 13
Timeline of the ISTA/NEA securities fraud litigation: Indiana-ISTA settlement timeline 12.3.13
Diagram of the money trail: Indiana-ISTA settlement Money Trail 12.3.13