May 15, 2008 — A few months after terminating a multi-million dollar contract with Best Construction to build a new facility on St. Croix, the board of trustees for the Government Employees' Retirement System decided Thursday to sue the company and its surety bond holder.
Because of the magnitude of the project — commissioned in August 2005 and scheduled for completion at the end of 2006 — Best Construction took out a surety bond with International Bonding and Construction Services (IBCS). If Best Construction was unable to complete the project, the bonding company was supposed to have taken over, according to GERS board Chairman Vincent Liger.
The company has refused to do so, however, Liger said Thursday. IBCS contends that the bond has expired and that GERS changed the terms of the original contract, said GERS board attorney Pedro Williams.
Best Construction was fired in late January after construction delays held up the project by about a year, Liger said. The company also didn't have enough money to finish work on the building, he said.
GERS is getting ready to find another contractor to complete the work, but no one has been selected yet, Liger said.
The board also decided to join a class-action suit against Candela Corporation, a Maryland-based company that develops and sells medical lasers. One of GERS' investment managers bought stock in Candela, but it has been discovered that the company inflated the price of the stock, causing GERS to lose about $200,000, Liger said.
On a more positive note, the GERS board announced the selection of six new money managers, responsible for diversifying the system's investment portfolio once the government issues pension-obligation bonds to pay down a portion of its more than $1 billion unfunded liability.
Selected money managers are:
— core real estate: UBS;
— value-added real estate: BlackRock;
— private equity: BlackRock and Mesirow; and
— hedge funds: Entrust, Aetos and Rock Creek.
Looking at its financials, GERS' available cash for the month of April totaled about $11.3 million. However, it spent about $17.5 million in annuity payments, administrative expenses, loans and refunds, leaving a cash-flow deficit of about $6.2 million.
For the first half of fiscal year 2008, GERS' available cash — from October 2007 to April 2008 — totaled nearly $83.2 million. Payments out of the system totaled $128.4 million, leaving a cash-flow deficit of nearly $45.3 million.
Present during Thursday's meeting were board members Yvonne Bowsky, Carver Farrow, Raymond James, Liger, Marvin Pickering and Leona Smith.
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