Overseers of retirement funds for public employees around the country said Thursday that the accounting scandal at telecom giant WorldCom already has cost them well over $1 billion in lost stock and bond investments.
WorldCom, the country's second-largest long distance telephone company, stunned the world Tuesday by disclosing that it had nearly $4 billion in improperly treated expenses.
The news disintegrated the value of WorldCom's already battered shares, and three bond-rating agencies slashed WorldCom's debt ratings deeper into "junk" territory, citing the increased likelihood of default.
As a result of all this, the California Public Employees' Retirement System, the biggest pension fund in the U.S., faces an unrealized loss of $565 million in its $150 billion portfolio, according to the Reuters news agency.
The country's No. 2 pension fund, the New York state retirement system, estimates it lost $300 million. It has $112 billion in total assets.
New York Comptroller Carl McCall said through a spokesman that he "is outraged that another irresponsible corporate action has defrauded members of the pension system and all investors."
But other state officials told Reuters that benefit recipients can relax for now.
Sherry Reser, a spokeswoman for the California State Teachers Retirement System, said the losses will have "no impact on the pension that our members will receive and it will not affect contributions."
Reuters notes that Cal Teachers, the third-largest U.S. public pension fund, with $100 billion in assets, suffered a $109 million unrealized loss due to WorldCom.
Reuters also reported these other state pension fund losses related to WorldCom:
- The State of Wisconsin Investment Board says realized losses on its $58.5 billion in assets reached $29 million on WorldCom bonds and $7.3 million on stock.
- Michigan lost $116 million in its four pension funds.
- The Florida State Board of Administration public pension fund lost $92 million on WorldCom stock and estimates a $54 million loss on its bonds holdings.
- Virginia's retirement system has an unrealized stock loss of $44 million in indexed funds.
- Oregon pensions have $63 million in unrealized losses, of which $38 million is in stocks and $25 million is in bonds.
