Green Room

Indiana “Ponzi-like Scheme” Will Cost NEA $14 Million

posted at 1:51 pm on August 13, 2013 by

It didn’t take as long as I thought for the details to come out about the settlement between the state of Indiana, the Indiana State Teachers Association and the National Education Association over the financial collapse of the union’s insurance trust. The state sued ISTA and NEA, claiming more than $27 million was owed to participating school districts after the trust went under due to bad, high-risk investments.

Under the terms of the settlement, NEA and ISTA will pay $14 million to the state within 10 days of all 27 school districts involved agreeing to the terms. Which union owes what was not disclosed, but it is academic since the Indiana affiliate is millions of dollars in the red and still effectively under NEA administratorship. The immediate payment will have to come from NEA’s national coffers, which means teachers all across the country are on the hook again to bail out ISTA.

“ISTA was blatantly covering up their Ponzi-like scheme through falsified account statements,” said Indiana Secretary of State Connie Lawson. “Repeatedly doctoring account statements to create the illusion that investment funds exist after they’ve been misappropriated is shameful. I hope this case will serve as a warning to others who think they can take advantage of their investors and as a reminder to investors to keep a vigilant eye on their investments. I further believe that ISTA and the NEA have the moral obligation to repay the full amount of losses suffered by these schools.”

Don’t hold your breath for that, Secretary Lawson.

On the plus side for NEA, the settlement levies no fines or legal fee reimbursement upon the union. NEA also ends up paying 52 cents on the dollar. The $14 million payout may end up being a bargain considering how bad it could have been.

The secretary of state’s office provided a timeline of events leading to the settlement, although this Indianapolis Business Journal recap covers more of the essentials. The Secretary of State also gave this handy chart of how the money was moved within ISTA.

ISTAMoneyTrail

If you followed my reporting from the NEA convention last month, you know that the national union doesn’t have $14 million just lying around unused. There will have to be some financial tap-dancing to pay for this settlement, which means program cuts and/or more layoffs. As always, I need to emphasize that grants to affiliates and campaign spending all come out of segregated funds and will be unaffected by hits to NEA’s operating budget.

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One thing worth noting here is that unlike the Obama administration, where people f**k up and get promoted, all of the people involved in the ISTA clusterf**k have lost their jobs. And the people left there are just as mad about what happened as the general public.

Chris of Rights on August 13, 2013 at 2:24 PM

“ISTA was blatantly covering up their Ponzi-like scheme through falsified account statements,” said Indiana Secretary of State Connie Lawson.

No criminal charges against the individuals who did this? No prison time?

rbj on August 13, 2013 at 2:30 PM

One thing worth noting here is that unlike the Obama administration, where people f**k up and get promoted, all of the people involved in the ISTA clusterf**k have lost their jobs.
Chris of Rights on August 13, 2013 at 2:24 PM

In related news, a whole slew of uniquely qualified candidates from Indiana has become available for positions in the Obama administration’s Budget Office and for Obamacare implementation.

VelvetElvis on August 13, 2013 at 3:00 PM

But, but, but it’s for the children!

Why do you hate the children?

Republican War On Children.

Bailout Now!

M240H on August 13, 2013 at 3:09 PM

Want to quickly close the gap on the $27 million shortfall?

Require every politician and labor union which received donations from the ISTA/NEA in Indiana to reimburse the State.

BigAlSouth on August 13, 2013 at 3:55 PM

ISTA was one of the main owners of GM and Chrysler yet were forced out by the Obama Administration’s auto bailout. It isnt their fault that normal bankruptcy procedures were not followed. If they had their finances would have been fine.

jayhawkboilermaker on August 13, 2013 at 5:17 PM

And not a peep of this from the AP or the Indianapolis Star which had front page coverage and editorializing for days about alleged school grade fixing.

Skywise on August 13, 2013 at 10:03 PM

Want to quickly close the gap on the $27 million shortfall?

Require every DEMOCRAT politician and labor union which received donations from the ISTA/NEA in Indiana to reimburse the State.

BigAlSouth on August 13, 2013 at 3:55 PM

FIFY…

Khun Joe on August 14, 2013 at 2:10 AM

jayhawkboilermaker on August 13, 2013 at 5:17 PM

Is that true? If so, why did they hide it?
Interesting questions all around.

Badger40 on August 14, 2013 at 8:37 AM

Well, since we know that the banks are responsible for Detroit’s demise (or so all the Dems in Detroit say) it must be the evil banks and investment companies that are responsible for this ISTA/NEA mess too. /

Hill60 on August 14, 2013 at 9:31 AM

ISTA was one of the main owners of GM and Chrysler yet were forced out by the Obama Administration’s auto bailout. It isnt their fault that normal bankruptcy procedures were not followed. If they had their finances would have been fine.

jayhawkboilermaker on August 13, 2013 at 5:17 PM

True.

But they’ll never blame Obama for it, will they?

They’ll fall on their swords for him.

either orr on August 14, 2013 at 11:18 AM

Is that true? If so, why did they hide it?
Interesting questions all around.

Badger40 on August 14, 2013 at 8:37 AM

jayhawk exaggerates a bit. They would not have been “fine”, but yes, they were hurt tremendously by the bailouts. Why did they hide it? Well, they didn’t exactly, but they didn’t announce it either. There are two reasons, you pick which one seems like it might weigh heavier.

1) They really didn’t want to bring any more attention than necessary to their financial decisions. If they bring up GM and Chrysler, they would likely have to start talking more about their other stupid decisions. In this case, the ISTA has done everything possible to just make this story go away.

2) The ISTA worships at the feet of Obama. They would never openly criticize His decisions. In fact, they openly campaigned for Obamacare, despite the fact that it destroys their own health insurance (if you call great healthcare plans “Cadillac Plans”, then the one the ISTA had was a “Rolls Royce”).

Chris of Rights on August 15, 2013 at 9:41 AM