Who advised Arizona to invest in NCFE? John McCain?

*Ratification of Authorization to Initiate Litigation Seeking to Recover Losses Incurred Through Investments in Bonds Issued by National Century Financial Enterprises and Authorization to Enter into an Intergovernmental Agreement with Other Arizona Governmental Entities to Pursue Recovery of These Losses (ASU and NAU)

The Local Government Investment Pool (LGIP) is a statutorily authorized investment fund, consisting of monies deposited by the State and more than 100 counties, cities, political subdivisions, and other public entities, managed by the State Treasurer.

Between March 2001 and June 2002, the State Treasurer invested a portion of the LGIP funds in NCFE bonds. In October 2002, a nationwide scandal broke out concerning financial mismanagement and possible fraud by NCFE’s principals and in November 2002, NCFE filed for bankruptcy. ASU lost nearly $4M and NAU lost approximately $600,000. The UA did not, at that time, have any funds invested in the LGIP. The Arizona Attorney General’s office filed a bankruptcy claim on behalf of the State Treasurer and all of the Arizona real parties in interest.

Earlier this year several of the individual public entity investors, including ASU, began a series of meetings to examine options available to the investors to recover their losses, including filing a lawsuit against NCFE principals, bond trustees, and other third parties. The group proposed retaining separate counsel for the investors using an intergovern-mental agreement or similar agreement and eventually selected Gibbs & Bruns, a Houston law firm that is already representing investors accounting for about $1.3B in NCFE losses. Cohen Kennedy Dowd & Quigley is local counsel.

On May 16, 2003, the public entity investors were asked to notify the Gibbs and Bruns law firm of their intent to participate in the litigation. The law firm advised of the need for a timely filing in order to avoid potential statute of limitations issues. As authorized by ABOR Policy 1-109 (B), Board Counsel authorized initiation of litigation by ASU and NAU following consultation with Board President Jewett. Under that policy, Board Counsel’s decision to authorize the initiation of litigation is subject to ratification by the Board at its next meeting.

The Board ratified the decision to initiate litigation to pursue the recovery of investment losses incurred by ASU and NAU through an investment of public funds by the Local Government Investment Pool in bonds issued by National Century Financial Enterprises and authorized ASU and NAU to enter into an intergovernmental agreement with other Arizona governmental entities to pursue recovery of these losses, including authority to compromise and/or settle claims and to provide for the distribution of recovered funds.