New Mexico Association of Educational Retirees
June 4, 2010
The Honorable Gary King
New Mexico Attorney General
P.O. Drawer 1508
Santa Fe, New Mexico 87504-1508
RE: Support of Request from the Educational Retirement Board and the Department of Finance and Administration Concerning ERB’s Policy on Indemnification
Dear Sir:
This letter is sent in support of the requests by the Educational Retirement Board and the Department of Finance and Administration for your opinion concerning the recently passed Educational Retirement Board Policy, Section 22-11-13(H) regarding the right of indemnification. Because of the implications of this policy, we ask that you respond to these requests in a timely manner.
In our view, the most critical items under Section V, General Conditions and Implementation of Policy, are presented below.
– The permissive language of Paragraph F ("may", not "shall") would permit NMERB to use the Fund to pay fees – or reimburse Board member’s private legal and non-legally related costs – if that member were to be finally convicted for breach of fiduciary to the Fund.
– The permissive language of this section would seem to allow for payment or reimbursement for personal services that:
Fall outside the definition of legally-related services, i.e., a public relations firm; and,
Are incurred in the defense of legal actions against the Board member’s business or family.
– We are concerned that the aforementioned items could be paid whether or not the member is finally convicted.
– Paragraph C protects the confidentiality privilege of a member requesting indemnification or advancement by permitting the submission of redacted documents. Upon request, unredacted documents may be made available for review by NMERB and its representative; however, the member requesting payment retains physical custody and control of the documents. We are concerned that a request for payment that is paid from the Fund will not be accessible for review and full disclosure to the public upon request.
In the policy statement, the right of Board members to be protected by indemnification in the lawful pursuit of the constitutional and statutory responsibilities is recognized. (Ref., Section I, Purpose). The policy also recognizes fiduciary duties of loyalty on the NMERB: 1. Fund assets and expenditures shall be used for the benefit of identified members, retirees, and other beneficiaries; and, 2. Fund expenditures may be made only for the benefit of trust beneficiaries and the administration of the System. (Ref. NM Consti., Art. XX, § 22 (A).
The New Mexico Association of Educational Retirees (NMAER) supports and defends the indemnification of Board members who have performed their duties in good faith and whose actions demonstrate members to be acting in a manner consistent with the fiduciary responsibilities to the Fund. NMAER also believes that a Board member found guilty of violating this responsibility forfeits the benefit of indemnification and should be held personally responsible for all expenses incurred, including repayment of advancements already received.
NMAER believes that conflict may exist between the permissive language in the policy and the ERB mandate.
We trust that you will respond to the requests from the Educational Retirement Board and the Department of Finance and Administration to resolve these concerns.
Very Truly Yours,
Barbara Bonahoom, President
New Mexico Association of Educational Retirees
cc: Members, Educational Retirement Board
Jan Goodwin, Executive Director, Educational Retirement Board
Katherine B. Miller, Secretary, Department of Finance and Administration