Sunday, June 14, 2009

City of Detroit Unable to Reign in Pension Fund Trustees: New Report on Abuse

Trustees for the two city of Detroit pension funds have globe-trotted to the tune of $380,000 in the past year, the Detroit Free Press reports today.
The trustees “often traveling in packs, with virtually no limitation on where they went or how often they traveled.
Trustee Ronald Gracia spent the most time on the road -- billing the General Retirement System for $105,000 in travel, including three trips to Singapore and $18,600 on travel to Hong Kong, according to records provided by the pension funds,” the Freep reports. To gather records for the story, the newspaper was forced to sue the two retirement systems, which charged over $3,000 for the sought after records.
“The Free Press sought additional travel and other documents in late 2008 but was told those records would cost more than $41,000.
In its suit, the Free Press said the fees violate the law and are "unconscionable. As such, they constitute a constructive denial of the Detroit Free Press' FOIA requests."
Pension fund lawyers have described the Free Press' case as "entirely frivolous." They agreed in May to turn over some records as part of the litigation.”
Most of the trustees and their lawyer did not return calls to the Freep, but one, Garcia, did defend himself in an email, stating that his further education in ways to invest pension money required his travel.
The pension funds and their administration have been questioned before, most recently in May as the Freep tried to obtain records.
In 2003, two audits were scheduled of the $2.2 billion fund after the discovery that board trustees had racked up $586.269 in travel costs between 1999 and 2002. Third Circuit Court Judge John Gillis Jr., barred board members from taking some scheduled trips -- to destinations including Arizona, California and Florida -- for pension business.
Also that year, “the pension board sued Mayor Kwame Kilpatrick and [city CFO Sean] Werdlow, alleging Werdlow was interfering with trustees' ability to perform pension board duties by demanding accountability for time spent conducting pension business on city time,” according to a story in Crain’s Detroit Business.
In 2004, Werdlow tried to impose some kind of oversight on the trustees but nothing came of it. Werdlow today is at Siebert Brandford Shank, a securities brokerage. Would have loved to seen his comment in the Freep story, which does a fine job detailing the unfettered abuse of the public trust in a city with a deficit of over $300 million.

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