What about the ’spikes’ in ASGERF operating expenses?

Pago Pago, AMERICAN SAMOA — In his final letter to the editor about the status of the American Samoa Government Employees Retirement Fund (ASGERF), “Encore: Proof of Decay at ASGERF”, Fuiavailili Keniseli Lafaele in part writes:

“At the May 2022 board meeting in Las Vegas, a Fono member questioned the unexplained spike in operating expenses — $5.3 million in FY 2019 and $4.3 million in FY 2020 — during the auditor’s presentation. The room fell silent. The auditor glanced awkwardly at the chairman and the ED, and the Fono member, sensing discomfort, did not press the issue further. I pursued the matter in subsequent board meetings, but management cited instructions from the chairman not to release the information. When I asked the chairman directly, he curtly responded: ‘Forget the past. Move forward.’ But if no corrective action is taken, history tends to repeat itself.” [published Samoa News, July 02, 2025]

Samoa News has received queries about the “unexplained spike in operating expenses — $5.3 million in FY 2019 and $4.3 million in FY 2020 — during the auditor’s presentation.” What exactly was the ‘unexplained spike’?

Response:

Samoa News looked into the issue, and has not received any direct answers about the spikes. However, it is possible a lawsuit that has come to light, could be a part of the reason for ‘unexplained’ spike in expenses in the retirement fund, noted in Fuiavailili’s LTE.

Public records indicate that the lawsuit was filed against the Fund and South Pacific Link, LLC, in early 2021 by a private consulting firm, Trpkovski Advisory Group (TAG) seeking damages. The complaint lists four (4) causes of action: Constructive Fraud, Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, and Misappropriation of Trade Secrets.

TAG, Inc. is a corporation located in the State of Hawaii, while SPL is a limited liability company organized per laws of the State of Hawaii. The case was filed in California.

The complaint for damages centers around what TAG says was ASGERF’s strategic plan, conceived under the direction of Talia Iaulaualo Faafetai, in 2019, and “working in concert with” SPL, was to “raise capital for ASGERF, to create long-term sustainability for the retirement fund, and generally to benefit the people of American Samoa.

“Essentially, ASGERF’s strategic objectives were to:

 (1) monetize the indefeasible Right of Use of the American Samoa Undersea Cable Connectivity platform (the ‘Tafuna Spur”) and thereby create long-term recurring revenue opportunities for capacity on the Tafuna Spur with strategic partners worldwide;

(2) implement technology initiatives in American Samoa supported by strategic partners of ASGERF;

(3) create STEM education opportunities for students in American Samoa;

(4) create hyper-scale data centers; and

(5) create high-tech medical centers and bring state-of-the-art medical device technology to American Samoa.”

To get this done, according to the Complaint, ASGERF and SPL “engaged in extensive dialogue and negotiations with TAG,” in or around summer, 2019, which were successful as they (ASGERF and SPL) decided to contract with TAG. “In fact, on August 8, 2019, a written ‘Engagement Proposal — Project DataStream’ was entered in by and between ASGERF and TAG, Inc.

“TAG Inc. specifically relied upon the representations of Defendants ASGERF and South Pacific Link, LLC that ASGERF was ready, willing and able to retain and pay TAG, Inc. for the services to be rendered by it under the Engagement Proposal.

“In fact, Michael Kornichzky, the CEO of Defendant South Pacific Link, LLC, executed the Engagement Proposal on behalf of ASGERF and its authorized agent in this matter and at the specific instruction of Talia Iaulualo Faafetai and ASGERF.”

(Samoa News should point out that Kornichzky is the CEO of the company that owns the rights to the Hawaiki Fiber Optic Cable spur located in American Samoa.)

The Engagement Proposal specifically called for “an annual retainer of US$1.5 million for the 4-year duration of the project to be paid by ASGERF to TAG, Inc (for a total retainer of $6 million to be paid to TAG, Inc.), with quarterly payments of $375,000 to be made commencing March 1, 2020.”

The proposal also specifically called “for an accelerated payment to TAG, Inc. of 3 years if retainer payments, i.e. $4.5 million, in the event of cancellation by ASGERF of the project contemplated in the Engagement Proposal (i.e. in the event of termination of the Engagement Proposal).

“This cancellation provision was specifically bargained for because of the elaborate and intensive nature of the work to be performed by TAG, Inc. and its partners … commencing immediately after August 8, 2019, even though first quarterly payment from ASGERF did come due until March 1, 2020.”

The Complaint notes that TAG performed extensive work on behalf of ASGERF following execution of the Engagement Proposal and that it “worked tirelessly with its partners from August, 2019 through January, 2020 to cultivate and bring to fruition the  contemplated Cisco-ASGERF strategic relationship.

“In fact a first meeting was arranged in September, 2019 in San Jose, California, in the center of Silicon Valley, between the ED of ASGERF (Talia Iaulualo Faafetai) and various Members of the Board of Directors of ASGERF, including the Chairman of the Board. Thereafter, additional meetings between Cisco, ASGERF and South Pacific Link, LLC occurred in November- December, 2019, and January, 2020.”

According to the Complaint, the Cisco relationship was not realized “given ASGERF’s breach of the Engagement Proposal…”

The breach occurred when “inexplicably” in “February, 2020, ASGERF unilaterally terminated the Engagement Proposal with TAG, Inc.” TAG also noted that the Fund had also failed to remit the 1st quarterly payment of $375,000 due on Mar. 1, 2020 and had made no payment whatsoever to TAG to date. The Complaint states that “despite repeated written demand therefor, ASGERF continues to refuse to remit the sums due TAG, Inc. and persist in its repudiation of the Engagement Proposal...”

It further notes that “ASGERF has retained and is currently utilizing TAG Inc.’s Trade Secrets.”

Iaulualo’s run for governor of American Samoa is mentioned in the Complaint as “incidental to his candidacy, Mr. Faafetai released candidate statements to the people of American Samoa whereby he touted his “Economic Development Plan”, which specifically included the contemplated data center, medical facilities and other aspects of the Strategic Plan… with respect to which TAG, Inc. had contracted with ASGERF to liaise and facilitate.”

The Complaint calls for $4.5 million to be paid to TAG, Inc. for damages incurred in each Cause of Action (the 4 alleged breaches of the Engagement Proposal) as well as cost of suit, attorney’s fees and “for such other and further relief as the court deems proper…”

BACKGROUND

The suit appears to be a civil action suit, not involving government prosecution.

Timeline & Developments

According to the docket information, the initial notice of the lawsuit was filed on February 22, 2021. The available details indicate the complaint went through amendments; a First Amended Complaint (FAC) was noted in mid-2024, raising claims under California civil code provisions (implying the case may have been filed in a U.S. state court jurisdiction).

The dispute involves contract law or tort claims (since ERISA – the U.S. pension law – typically doesn’t apply to territorial government plans, a state law contract approach would make sense). The venue in the California Court is deemed proper “because the contract at issue between TAG and ASGERF specifies that the courts of the State of California, County of Los Angeles, shall have exclusive jurisdiction of any controversy arising thereunder.”

Legal Status & Outcome

Specific outcomes of this case have not been reported in the media.

The lawsuit was ongoing as of 2022, and an amended complaint was filed in 2024, indicating the case had not been quickly resolved.

There is no public record of a final judgment or settlement, suggesting the matter may have been settled confidentially or is still in progress. The lack of news coverage implies it was a relatively technical dispute.

In summary, this 2019- 2021 contract lawsuit was brought by an individual company (not fund members) and did not allege mismanagement of the fund’s assets per se, but rather a disagreement between a vendor and the Fund.

To date, it is still unknown on whether the lawsuit has been settled or dismissed, and as pointed out by Fuiavailili, the chairman of the Fund’s board has not been willing to discuss the case, despite the re-hiring of the former ED of the Fund after his failed 2024 gubernatorial campaign, where his development plan is alleged by TAG to be from the ‘work’ they did as part of the Engagement Proposal with ASGERF.