Indiana schools to receive millions in settlement money from teachers’ union

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State officials have announced the results of a multi-million dollar settlement with the Indiana State Teachers Association (ISTA) and National Education Association (NEA), which have agreed to a $14 million settlement in connection with a medical insurance plan that resulted in fraudulent investments.

Secretary of State Connie Lawson said the organizations defrauded Hoosier teachers out of $27 million. The case, originally filed four years ago, surrounds a medical plan offered by the ISTA to teachers and school employees. The plan allowed school corporations to invest excess balances to offset future health care costs.

According to the state’s complaint, that money wasn’t invested; instead, the ISTA used it to plug shortfalls in its long-term disability plan. In effect, Lawson said, it took money for one thing and used it for something else. Lawson also said the ISTA trust issued quarterly and annual statements that misrepresented the investments. Officials also provided the media with a graphic showing how the money got misused.

“What makes this case particularly disturbing is how ISTA blatantly lied to the participating school corporations by sending them phony financial statements,” said Lawson at a Tuesday morning news conference.

ISTA executive director Brenda Pike told Fox 59 she thought Lawson’s statements were politically motivated. Pike said the ISTA and its insurance trust were two seperate entities, and said no one at ISTA profited from any of the bad investments.

“There was never any indication anyone was guilty of wrongdoing,” said Pike. “Bad judgement? Perhaps. But not any wrongdoing… I don’t know why Ms. Lawson would have gone out of her way to have such a politically charged statement with such venom.”

“Both ISTA and NEA have repeatedly argued to the court that they’ve done nothing wrong and they have asked the court to remove them from the case to avoid their liability and at every step in the process the court has refused,” said Lawson.

So why settle? Lawson said it was to quickly help the school districts.

“First of all, the school corporations were telling us that they needed the money now,” Lawson said. “Secondly, we realize that there are no guarantees when you go to trial even though we thought we had a very strong case.”

The settlement gives back $14 million to 27 different school districts, including more than $3 million to the Crown Point School Corporation, and more than $1 million to Marion Community Schools. The Metropolitan School District of Washington Township will receive more than $987,000 and Center Grove Community Schools will collect nearly $600,000.

“(The district) is pleased that the Secretary of State has finalized the settlement,” Center Grove superintendent Rich Arkanoff said in a written statement.  Arkanoff said when the fraud was initially reported, Center Grove used money from its Rainy Day Fund to start its own insurance plan to replace the ISTA plan. The settlement requires schools to use the money for insurance costs or other related benefits.

ISTA officials issued the following statement Tuesday afternoon:

“Despite the political rhetoric used by Secretary of State Connie Lawson in her news conference this morning, it’s clear that the information is both inaccurate and contrary to the state’s pleadings in this case and in the final settlement. The state agreed in this settlement to expressly recognize that neither  ISTA nor NEA admitted any liability in this case. 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. ISTA regrets that the Office of the Indiana Secretary of State has decided for political reasons to misrepresent the resolution of this case. ISTA is grateful that this litigation has been resolved on terms that are fair to the school employees  involved. ISTA and NEA have always done the right thing and stood by their members since the outset of this matter and are proud to continue to do so.”

“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,” said Teresa Meredith, ISTA president.