Aug 22, 2014 6:22 AM
LOUISVILLE (AP) - One of Kentucky's public pension systems lost $69 million because it unknowingly purchased risky mortgage-backed securities in the run up to the 2008 housing market crash. But Thursday, the system got $23 million of those losses back in an unprecedented settlement with Bank of America and its related companies.
Democratic Attorney General Jack Conway announced the settlement along with the federal Department of Justice and attorneys general from five other states. The $23 million settlement covers $21 million in losses the retirement system suffered specifically from securities purchased from Bank of America and its subsidiaries Countrywide and Merrill Lynch.
"This is a bold step for Kentucky (because) historically the commonwealth of Kentucky and the Office of the Attorney General has not been one of the lead states in one of these financial fraud cases," Conway said. "We're very proud to be able to recoup this money for our beleaguered pension systems."
Kentucky Retirement Systems administers five public pension plans in Kentucky. Those plans are paid for with a mix of public money, state employee contributions and investment returns.
One of those five plans, the Kentucky Employees Retirement System, includes state government workers, non-teaching staff at state universities and workers at 13 community mental health centers that are considered quasi-governmental entities. State officials estimate that system has a $17.1 billion shortfall, making it the worst funded pension system in the country, according to Fitch Ratings.
The $23 million settlement will not solve that system's financial problems, but the retirement system's executive director said it was a "welcome event."
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