Hendricks County Flyer, Avon, IN

BREAKING NEWS

August 13, 2013

Lawsuit settlement will cost teachers’ union $14 million

Secretary of State Connie Lawson announced Tuesday that her office has reached an agreement — in principle — regarding terms of a settlement for $14 million with the Indiana State Teachers Association (ISTA) and the National Education Association (NEA) for allegedly defrauding Hoosier teachers out of more than $27 million.

The Secretary of State’s office alleged that ISTA and the NEA sold health plans, which were unregistered securities, to 27 school corporations. ISTA and the NEA then made misrepresentations regarding those securities and improperly commingled funds.

The tentative $14 million settlement will go to the school corporations to compensate for their lost investments. 

“This is the right result for teachers and schools,” Lawson saidin a press release.  “The tentative amount puts roughly 50 cents for every dollar lost from this mismanagement back to the school corporations.  While $14 million is a significant amount, it does not cover ISTA’s nor the NEA’s full financial obligation to the school corporations. We remain confident in our case, but took the leadership step to get this money in hand for schools as soon as possible.”

ISTA offered teachers and other school employees a medical plan that allowed school corporations to invest their excess balances to offset future health care costs.

In the Secretary of State’s complaint, the office alleges that ISTA didn’t invest the money, but instead used the money to cover significant shortfalls in their long-term disability plan. ISTA continuously issued quarterly and annual statements to schools misrepresenting fund balances.

ISTA and the NEA have made several attempts to have the case dismissed and skirt their financial responsibilities to the schools, Lawson said. ISTA has tried to portray themselves as the victim and tried to push all of the blame on David Karandos and state-level ISTA employees who managed ISTA’s investments.

ISTA was a victim in the Karandos case, but this case against ISTA and the NEA is distinct, Lawson said. In this case, the Secretary of State’s office believes ISTA used the money it took from school health plans to cover shortfalls in its long-term disability plan and to invest in risky securities with Karandos for its own benefit, instead of investing on behalf of the schools as promised.

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