Ohio Pensions Lost $480 Million After Lehman Collapse

Ahead of Tuesday hearings on the 2008 collapse of the banking giant, state records show Ohio pensions suffered hundreds of millions of dollars in losses.

(April 20, 2010) — According to state records, Ohio’s public pension funds took a $480 million hit to investments in the wake of the collapse of banking giant Lehman Brothers.

The records were recently released to U.S. Rep. Mary Jo Kilroy of Columbus. Kilroy pushed for the hearings on Lehman’s collapse before the House Committee on Financial Services after a 2,209-page report released last month showed Lehman used an accounting gimmick to mask $50 billion in debt prior to its collapse in September 2008. Former Lehman Brothers Holdings Inc. Chairman and Chief Executive Richard S. Fuld Jr. plans to tell lawmakers that regulators were aware of Lehman’s status as it approached bankruptcy, maintaining that the firm’s actions were not concealed.

Three months after Lehman filed for bankruptcy protection, the Ohio Public Employees Retirement System witnessed the steepest decline, dropping to $73.3 million in December 2008 from $441.4 million in December 2007.

Meanwhile, the AP reported, the State Teachers Retirement System saw the value of its Lehman holdings shrink $80 million, while the School Employees Retirement System lost $18.5 million. The Ohio Police & Fire Pension Fund saw its value decline by $11.2 million and the Highway Patrol Retirement System lost $2.4 million in value during the same period.

According to the AP, Kilroy said the examiner’s 2,209-page report highlighted questions about how regulators allowed the collapse of Lehman to happen and how other financial institutions are abusing the so-called “Repo 105” accounting practice, which allegedly allowed Lehman to hide the extent of its use of borrowed money, or leverage.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742