Article (Kostyu): Teachers’ pension board to consider lawsuit settlement

Canton Repository
December 7, 2005
By Paul E. Kostyu,
Copley Columbus Bureau Chief

COLUMBUS - For about $427,000, members of the state teachers’ pension fund board can make a class-action lawsuit, which already has cost the pension system $3 million, go away.

The board is expected to discuss Thursday a final settlement to the lawsuit brought by 260 noninvestment employees when the pension system didn’t pay their bonuses in 2003.

“I won’t say anything about the lawsuit,” said Robert B. Brown, chairman of the board.

But Dennis Leone, a member of the board who voted against a $3 million partial settlement last month, said terms have been offered and he’s “upset with the proposal. I’ve felt that way since November.” He would not discuss the details.

Copley Ohio Newspapers has learned the State Teachers Retirement System board will be asked to agree to:

• Paying the employees’ 8 percent share toward their retirement based on the bonuses they received in the earlier settlement. This is expected to cost about $148,860.

• Adding four current or former employees to the list of employees covered by both parts of the settlement.

• Paying an additional $275,000 in attorney fees to the employees’ lawyer, Michael R. Szolosi Sr. of Columbus. His total from both settlements will be $900,000.

• Paying additional litigation expenses not covered in the first settlement, which was $13,000. The final bill is expected to be at least $3,000.

In return, the board would not face punitive damages for withholding the bonuses.

A 2003 investigation by Copley found that bonuses were awarded for tasks, called “stretch goals,” that many considered part of employees’ regular jobs.

The retirement board suspended and then abolished the bonus program. It also voted not to award the bonuses to noninvestment staff, overriding decisions to do so by the former and current executive directors. It also ignored the advice of its state attorney. The employees then sued.

John Lazarus, another board member who voted against the initial settlement, said he would vote against this one as well.

““I didn’t think it was right to pay the bonuses,” he said, “and the board had no obligation to pay them. I’m against it whatever the final agreement comes out to be.”

Szolosi would not discuss the details of the settlement, but said Tuesday he’s been told the board would vote on the settlement Thursday.

He said a fairness hearing has been set for Dec. 15 in Franklin County Common Pleas Court, giving any noninvestment employee unhappy with the settlement a week to raise an objection. Szolosi said he didn’t expect any to do so.

“I’m personally optimistic the board will approve this settlement reached by the lawyers,” Szolosi said. “There would be no further risk of punitive damages. They would have managed a significant risk by eliminating it.”

Once a settlement is reached, the board can expect still another bill, which also could reach six figures — from Attorney General Jim Petro, who assigned Columbus attorneys Roger Schantz and John Stock as special counsel to defend the pension board.

“I am of the opinion that those responsible for these expenses should assume the financial burden not the pension fund,” Leone said, referring to the more than $3,427,000 total settlement amount.

Asked if he meant former Executive Director Herbert Dyer, who set up the bonus system, former board members who approved the system and Petro, Leone would not say.

“I’ll be specific with names at the meeting,” he said.

Laura Ecklar, a spokeswoman for the board, Schantz and Petro’s office did not return phone calls seeking comment.

Reach Copley Columbus Bureau Chief Paul E. Kostyu at (614) 222-8901 or e-mail paul.kostyu@cantonrep.com