INDIANAPOLIS (CN) – Teachers at 26 Indiana school districts paid millions of dollars to health programs that were so poorly managed they lost $23 million, the Indiana Securities Commissioner says. The state claims the Indiana State Teachers Association and four ISTA affiliates sold unregistered securities to school districts, acted as investment advisers without being registered, and defrauded schools by lies or omissions.
The other defendants in Marion County Court are the ISTA Insurance Trust, ISTA Financial Services Corp., ISTA Welfare Benefits Trust, and ISTA Administrative Services Corp.
ISTA was established to offer health benefits and long-term disability for teachers and other school employees. The insurance offered included a claims stabilization reserve, or CSR program.
But the state says ISTA field representatives misled teachers, claiming they would be paid back the money they paid the program at the end of the year, if the premiums paid exceeded claims. Some school districts were even “guaranteed rates of return,” the state says.
But the program was so poorly managed it lost $23 million and the “ISTA Trust did not have sufficient funds to meet its obligations,” the state says. Now ISTA does not have enough money to meet its obligations, which are estimated at $56 million, according to the complaint.
The state wants ISTA’s accounts frozen, except those used to pay teachers on long-term disability. It also seeks a conservator and injunctions.
“The Commissioner specifically seeks to prohibit the ISTA Entities from distributing any funds to school districts until an independent accounting can be accomplished to confirm an equitable distribution among the various districts.”
The state also sued the National Education Association, which is not accused of wrongdoing; it is named as a defendant because it took over day-to-day operations of ISTA in May.