Fraud and waste at retirement board
Generosity of Hampden County agency seems boundless
AFTER YEARS of public pension fund scandals and legislated reforms, there is still more to be done to protect public employee pensions and taxpayers’ money.
A case in point is the recent fraud and waste uncovered at the Hampden County Regional Retirement Board. An audit covering 2014-2017, conducted by the Massachusetts Public Employee Retirement Administration Commission, identified nearly $800,000 that was lost to the retirement system through illegal contracts, violations of state law, mismanagement, payment of fraudulent invoices, and violations of the state’s ethics laws.
The audit identified the payment of $235,000 in invoices for which there are no underlying contracts and no documentation of either the services provided or the providers’ performance. Also, there was payment of $87,229 in bank service charges, despite maintaining an account balance of between $5.6 million to $27.4 million. The audit noted that other boards, with similar balances did not pay any bank fees.
Massachusetts law prohibits the hiring of attorneys as regular retirement system employees. Despite that, the Hampden County board hired two and made them regular employees of the system. They were paid $179,266 for legal services during the audit period, although there is no documentation of hours worked. Moreover, the retirement board illegally paid 90 percent of the health insurance premiums for the two attorneys, costing the system $269,144.
The generosity of the Hampden County board seems boundless. The audit discovered that the board unlawfully paid the employer share of Social Security, in the amount of $4,842, for those serving on the board. Public employees in Massachusetts are not and have never been part of the Social Security System.
The long-time chair of the retirement board, Richard Theroux of Agawam, was personally cited in the audit. The audit found that a payment of $1,825 was made to the chair for hotel expenses for a conference on Cape Cod. In fact, Theroux stayed in his own condominium and submitted a false receipt citing an address in his own Cape Cod condominium complex that did not exist. When the audit became public, the chairman acknowledged his “mistake” and repaid the $1,825. Theroux later reimbursed the retirement board an additional $3,825 for payments received before and after the audit period, for a total of $5,650. Theroux, as chair, also received a $1,843 annual salary increase during the audit period, although there was no recorded vote authorizing it.
In a clear violation of the state’s ethics law, members of the board accepted entertainment and lodging benefits exceeding $7,983 paid for by the board’s investment consultant. But why the retirement board retains an investment consultant, when 97 percent of Hampden County retirement funds are bundled with and invested by the state retirement system known as the PRIT Fund, is another question.
The Public Employee Retirement Administration Commission audit uncovered numerous other irregularities, including lack of standard and proper procedures for procurement; failure to exercise due diligence; deficiencies in monitoring vendors and scrutinizing expenses; inadequate policies and procedures regarding travel approval and reimbursement and overtime approval and documentation; failure to file certain required federal tax forms; questionable overtime payments; budget and accounting system inconsistencies and deficiencies; and cash accounting issues.
As a result, Public Employee Retirement Administration Commission referred certain findings contained in the audit to the offices of the attorney general, the inspector general, and the State Ethics Commission. In addition, the commission issued a temporary order to the Hampden County board, including weekly staff meetings of the commission and retirement board, thorough review by the commission of the retirement board’s monthly financial activities, restrictions on retirement board travel, and the development of an internal control plan.
The commission has been working with the Hampden County Retirement System to implement reforms, but thus far, there has been no accountability for board members who acted illegally and unethically, squandering retirement funds contributed by Hampden County towns and their employees. Four of the five board members are still in place.
Following a series of articles in the local press, Theroux announced in May that he would resign. He has now changed his mind stating, ironically, that he is needed to oversee important changes and reforms.
The commission and local Hampden County officials have appealed to the attorney general, the inspector general, and the Massachusetts Ethics Commission to intervene and enforce the law and ethical norms. Without those agencies taking swift and decisive action, there is no reason to believe that the current board will implement necessary reforms and act in the interests of Hampden County towns and their employees.The Hampden County Regional Retirement System should be placed in receivership until probity and effective governance can be restored.
Donald Davenport is chair of the Hampden Board of Selectment; Robert T. Markel is the town administration in Hampden; Mark Gold is a member of the Longmeadow Select Board; Lyn Simmons is town manager in Longmeadow; William Sapelli is the mayor of Agawam; Joshua Garcia is the Blanford town administrator; Katherine Warden is the Chester town administrator; Jennifer Wolowitz is the Monson town administrator; Patricia A. Oney, Dr. Richard M. Smith, and Mary K. Hull are members of the Monson Board of Selectmen; and John Baldasaro, Richard Holzman, and Jason Forgue are members of the Chester Select Board.