School districts sue over Lehman collapse


By Bay City News Service

Twelve Peninsula school districts are suing San Mateo County in an effort to recuperate $20 million in investments the schools lost when Lehman Brothers collapsed in September 2008.

The districts that joined the San Mateo County Superintendent of Schools in the lawsuit included Menlo Park, Las Lomitas, Portola Valley, and Woodside, all K-8 districts.

The lawsuit, filed Tuesday in San Francisco County Superior Court, alleges that former San Mateo County Treasurer Lee Buffington acted imprudently when making investment decisions with funds in the $155 million San Mateo Pooled Investment Fund.

The fund was established to allow local agencies within the county to pool their funds, supposedly to facilitate safe and efficient investments, according to the lawsuit.

The suit alleges that Mr. Buffington and other county investment managers were negligent when they failed to diversify the pool's securities, 17 percent of which were made up of Lehman holdings two weeks prior to the bankruptcy.

"The portion of the Pool invested in Lehman would have been excessive and imprudent under the best of circumstances," attorneys for the plaintiffs stated in court papers.

The suit further alleges that the county breached its fiduciary duty to its fund's investors by taking inordinate risks with plaintiff's money and failing to devote adequate resources to manage it.

"The county's breach of its fiduciary duty was a substantial factor in bringing about losses incurred by the Plaintiffs," according to court papers.

Attorneys for the plaintiffs and defendants did not immediately return calls seeking comment today.

Other districts that that joined the lawsuit were Union High School District, Belmont-Redwood Shores Elementary School District, Cabrillo Unified School District, Burlingame Elementary School District, Jefferson Elementary School District, Ravenswood City Elementary School District, San Bruno Park Elementary School District, and San Carlos Elementary School District.

For more information see The Almanac's article from Nov. 10, 2010.

What is community worth to you?
Support local journalism.


Like this comment
Posted by Downtowner
a resident of Menlo Park: Central Menlo Park
on Jan 6, 2011 at 12:31 pm

I understand that the districts lost $$ when Lehman failed but did anyone anticipate that? Wasn't it a big surprise within the investment community? Did the school districts pay to hire financial advisors or did they try to save money by leaving investment decisions to non-professionals?

I don't have a dog in this fight, but suing SMC for negligence or "fail[ing] to diversify" looks pretty lame. Why not take responsibility for the decisions to participate in the fund pool? Didn't school boards & Sup't have to approve this? Are they getting sued too?

Unfortunately this is typical behavior in a society which has devolved into finding others to blame for our own poor decisions & expecting reimbursement through court action. Time for tort reform, too. Some law firm is looking for a fat paycheck here. Oops, maybe this is pro bono!

Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Jan 6, 2011 at 12:38 pm

The superb Financial Manager at the Fire Board saw the Lehman collapse coming and took the Fire District's funds out of this County managed fund. The Fire District didn't lose a penny.

I have been told that school district are required by law to keep their funds in this County managed account but I do not know if that is a fact. AT least the school districts should have gone on record with the County on this issue before the Lehman collapse if they were concerned about the Lehman investments - did they?

Like this comment
Posted by Responsibility
a resident of another community
on Jan 6, 2011 at 2:51 pm

All of the public school districts in San Mateo, including SMCCCD are REQUIRED by law to deposit their funds in the county investment pool that is managed by the County Treasurer's office. This, ironically, is to protect those public funds from mismanagement at the school district level.

So, "Downtowner", you are completely incorrect. The school boards and superintendents had not authority over how the funds were invested. And most school boards and superintendents are in the business of managing public education systems, not in evaluating investments. That's the job of the County Treasurer's office.

Like this comment
Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Jan 6, 2011 at 3:11 pm

Responsibility - AT least the school districts should have gone on record with the County on this issue BEFORE the Lehman collapse if they were concerned about the Lehman investments - did they?

Like this comment
Posted by defending incompetence
a resident of Menlo Park: Downtown
on Jan 6, 2011 at 3:58 pm

It wasn't only that the investment was made in Lehman with OUR tax dollars and OUR bond money, it's that the amount invested was MORE than the county was supposed to have invested in any one place. Keeping money with the county is just supposed to be that. They don't have to MAKE money on the money. Careless and stupid. It's OUR money that WE want back. Don't make this an issue of "the schools" Some of the money that was lost was just being held by the county for a payroll. It was not supposed to be used by the county to make money!

Like this comment
Posted by Tobias
a resident of Atherton: other
on Jan 10, 2011 at 11:12 am

The answer to your question is Yes, they did.

Like this comment
Posted by Sue for being dumb
a resident of Menlo Park: Sharon Heights
on Jul 4, 2011 at 11:15 pm

That's funny, losers sue when they make a bet and loose. Take responsibility, what are you teaching your kiddos in school????

Like this comment
Posted by take a closer look
a resident of Menlo Park: Central Menlo Park
on Jul 5, 2011 at 8:52 am

Sue, you miss a critical point: The school districts are REQUIRED to turn their money over to the county. The county invests it. The schools have no choice in the matter, from entrusting it to the county or what to invest it in. But when they see that the money was invested recklessly (and/or stupidly), and lose millions as a result, is it any wonder they try to hold the county accountable and recoup the money?

Like this comment
Posted by henry
a resident of Menlo Park: The Willows
on Jul 5, 2011 at 12:40 pm

I think all the taxpayers in the County should sue the County for losing money in the San Mateo County Employee Retirement fund which the taxpayers will have to support.

We should sue CalPERS for the same reason. both funds dropped by a third.

Then we should sue somebody (maybe the mortgage banks) for allowing the no-downpayment-mortgages which set the failures off. And then we should sue the US government agencies Fanny Mae and Freddy Mac for condoning the practice. Then we should sue......

Posted by Name hidden
a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle

on Sep 21, 2017 at 10:20 pm

Due to repeated violations of our Terms of Use, comments from this poster are automatically removed. Why?

Sorry, but further commenting on this topic has been closed.

Don't be the last to know

Get the latest headlines sent straight to your inbox every day.

Verve Coffee to start brewing in Palo Alto this Friday
By Elena Kadvany | 8 comments | 2,158 views

Premarital and Couples: Musings on Life
By Chandrama Anderson | 0 comments | 1,454 views

Why we are Warming
By Sherry Listgarten | 25 comments | 1,262 views

Cap On? Cap Off? The Cities Respond
By Laura Stec | 4 comments | 1,107 views

The summer bucket list
By Cheryl Bac | 2 comments | 846 views