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Indiana

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Indiana State Teachers Association, NEA to repay schools in fraud settlement

– The Indiana secretary of state’s office has finalized a $14 million settlement of a federal securities fraud lawsuit against the Indiana State Teachers Association and its parent, the National Education Association.

The groups have 10 days to cut checks to 27 Indiana school corporations that lost more than $27 million in investments.

No northeast Indiana schools were affected.

“Today’s announcement is a victory for cash-strapped school corporations and a moment of closure for teachers whose health care premiums were misused,” Secretary of State Connie Lawson said.

A news release said the Indiana State Teachers Association and the NEA sold health plans with benefits – which were unregistered securities – to 27 school districts.

Then the groups used the money from the health plans’ reserve funds for their own benefit to cover funding shortfalls in their long-term disability plan and for risky investments.

“This is a classic example of a Ponzi scheme,” Lawson said.

She said that the state organization and the NEA have denied responsibility, but she hopes they cover the rest of the losses out of a moral obligation.

Lawson forwarded the case to federal authorities, who chose not to bring criminal charges.

The state teachers association fired back that Lawson was using political rhetoric.

A news release said the groups sued those actually responsible for the collapse of the Indiana State Teachers Association Insurance Trust.

That litigation resulted in the $14 million used to compensate the schools in Lawson’s case.

“ISTA and NEA have always done the right thing and stood by their members since the outset of this matter,” the statement said.

Lawson said her office chose not to seek fines or attorney’s fees to maximize the return of money to the districts.

As a result, the secretary of state’s office paid an outside law firm about $1.5 million out of its budget to litigate the case.

nkelly@jg.net

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