Senators approved in second reading today the administration’s request to lift the cap on the amount of money that the American Samoa Government Employees Retirement Fund can invest in the territory from 17% to 35%.
The change would allow the Retirement Fund Board of Directors to loan $18.2 million to the American Samoa Telecommunications Authority to pay for the Hawaiki Cable.
The vote was 9- 4.
Senators who voted in support of the bill are:Tuaolo Fruean, a member of the Retirement Fund Board, Faiivae Alex Godinet, chairman of the ASTCA Board, Tuiagamoa Tavai, Faamausili Mau Mau Jr., Alo Faauuga, Misalefua Hudson, Levu Solaita, Muagututi’a and Satele Galu Satele.
The four who voted no are Senators Magalei Logovii, Fonoti Tafaifa, Taua’a Sam Vaouli and Sauitufuga Pita Suiaunoa.
Sen Magalei Logovii
The vote came after senators questioned Attorney General Talauega Eleasalo Ale and the Executive Director of the Retirement Fund Iaulualo Talia Faafetai, about the proposed law.
The hearing also had Senator Tuaolo Fruean and Senator Faiivae Alex Godinet pleading with their colleagues to support the legislation because the Hawaiki Cable will bring benefits for American Samoa that would be beneficial for our children.
At the same time those opposing the bill like Senator Magalei Logovii spoke up strongly about the need to safeguard the Fund for present members and for the territory’s children.
The hearing got contentious when Senator Magalei asked the Attorney General about a sunset provision in the law authorizing ASG’s $20 million loan from the Retirement Fund.
This states that after the loan is repaid the ceiling on the cap for local investment would revert to 10%.
When provided a copy of the signed copy of the Act with the sunset provision Magalei was referring to, the AG said “what’s on the piece of paper in front of me is not in the law.”
He said when changes are made to a law, the governor and administration change language that’s in the law…they cannot change things that are not in the law.
Sen Faiivae
Magalei asked so if the law is incorrect do we continue using it?
“We have to correct it,” was the AG’s response.
Talauega said that the cap in the law is 17% . He also said that there are many laws on the books which are not enforced.
Iaulualo’s testimony covered the market crash of 2008 in which the Retirement Fund lost $50 million, while local imvestments fared well with an 8% rate of return.
He also explained the current situation where more than $20 million of investment returns are used each year to cover the deficit of combined employer and employee contributions and how much is paid out in benefits.
The executive director also explained that while the law puts a cap on local investment, there’s no limit on off island investments.
Sen Fonoti Tafaifa
Senator Magalei who used to be a member of the Retirement Fund Board, expressed his doubts on whether the Hawaiki Cable is a sound investment pointing out American Samoa was the only island connected to it, and whether ASTCA would be able to repay the Retirement Fund given its current financial state.
He said “we will be long gone, but members fo the Fund will be left without anything.”
Magalei said members of the Fund have grounds to take the board to court for not exercising their fiduciary duty regarding the Hawaiki Cable investment.
But Senator Tuaolo Fruean who chaired the hearing, gave a list of spending by the Retirement Fund and ASTCA in the past while Magalei was on the board, and the late Aleki Sene was Director of ASTCA and also a member of the Retirement Fund.
He mentioned that ASTCA is paying $189,000 a month for the O3B Network for 10 years, and there’s a $10 million loan from Rural Utilities Service of which there’s a $6 million balance.
He also pointed to the ASH Cable which then Governor Togiola initiated, using a $9 million investment from American Samoa. And ASH only returned a dividend last year.
Tuaolo said the Hawaiki Cable was the territory’s hope in generating new money and it’s a good move to invest money locally, rather then investing in overseas market and we end up losing $50 million when the market crashes.
Tuaolo told his colleagues he was a retiree like all of them and has children working in the government who are members of the Fund.
He said he can hardly sleep at night thinking of how to protect and grow the Fund,
Tuaolo also referred to the unfunded liability of the Fund and said this has to be addressed.
Magalei rebutted that the late Mr Sene did nto run up any debts and all of the Retirement Fund loans were paid by ASTCA.
He said it’s the people who came after Mr Sene who created the problems at ASTCA.
Senator Faiivae also went to bat for the administration bill and focused on the loss of $50 million from the market crash of 2008.
Faiivae said this enourmous loss was a little known fact and needed to be explained to the public.
He said it was better for the Retirement Fund money to be invested locally on a project that would reap benefits for the territory, and the risks are less.
Senator Fonoti Taifaifa was dead against investing any money in the Hawaiki Cable saying the modern means of telecommunications from phones to TVs and internet was making young people sinful.
The bill was reported to the Senate floor for a vote this morning following the hearing, and the vote, which was a show of hands was 9 for and 4 against.
