Thursday, May 21, 2009

Cincinnati Pension System and some ugly news

From John Curry, May 20, 2009
Cincinnati.com, May 18, 2009
City pension workers suspended
By Jane Prendergast jprendergast@enquirer.com
Cincinnati’s pension fund supervisor and an employee face discipline for the latest in a string of problems with the department, including that the city paid benefits for five years – to a dead person.
Keith Giles, supervisor of pension plans and a 28-year employee who earned $98,000 last year, remains on paid leave until an administrative hearing Wednesday. So does Norma Haywood, who reported to him. Neither could be reached Monday.
They allegedly violated rules regarding personal loans from their pension contributions and have been on paid leave – their union contract requires that pay continue, city officials said – since late January.
The $1.83 billion Cincinnati Retirement System, which has been in the news lately for losing $854 million last year, allows contributors to take out loans of up to $50,000 of their contributions and pay them back for up to five years. There also are limits to the number of loans.
Giles took out 20 loans in the past seven years, according to one audit, though the CRS handbook states a third loan must be paid in full before any subsequent loans can be taken out.
The loans carry a 7 percent interest rate. The up side for employees is that the city does no credit check, considering the employees’ contributions as collateral. About 1,500 employees currently have loans from the fund, totaling about $15 million, said John Boudinot, the system’s executive director.
Police investigators continue their work on the case, said Mark Ashworth, the city’s internal audit manager. However, Boudinot, who is leaving this week for a new job in St. Louis, said he is confident no theft occurred.
One employee has already paid back the loan and the other loan is being repaid, said Meg Olberding, spokeswoman for City Manager Milton Dohoney. Haywood earned $61,000 in 2008. She has been with the city since 1988.
Their cases brought to light two audits, in February 2007 and November 2008, of the retirement system operations. The audits list several office missteps:
• Not enough internal controls to make sure the system isn’t continuing to pay benefits to dead people. Auditors found payments to 14 dead people and beneficiaries, according to the 2007 audit, for a total of more than $102,000. Auditors recovered most of it, with retirement losing $3,463. The system had access to a Social Security Administration database employees could use to check for dead members, but it wasn’t being used, the audit said.
• Loan preparers and loan approvers signing off on their own loans;
• One retiring employee was given 22 days’ worth of working days he or she didn’t earn, which was enough to allow that person to qualify for the early retirement incentive package offered in 2007, which gave a two-year bonus to service time. The employee, just after retiring, was hired back as a contractor.
“Once we discovered there was a problem, we placed them on leave and we looked at the processes and straightened them out immediately,” Boudinot said Monday.
Of paying dead people, he said, “We’re not doing that anymore.”
Additional Facts
Executive director leaving
The executive director of Cincinnati's struggling pension fund system is leaving the job just as he has been warning that the fund's already significant losses will worsen.
John Boudinot, executive director for about three years, plans to return to Missouri, where his family has continued to live while he has been in Cincinnati. This is his last week in the job.
His departure has nothing to do with the pending allegations against two Cincinnati Retirement System employees, said Meg Olberding, spokeswoman for City Manager Milton Dohoney.
~ ~ ~ ~ ~
Cincinnati.com, May 20, 2009
Top pension official a financial wreck
By Jane Prendergast jprendergast@enquirer.com
The long-time Cincinnati pension system supervisor accused of improperly loaning himself money from his contributions faces a host of personal financial problems - including bankruptcy, an Enquirer investigation shows.
Gordon Keith Giles, a 28-year city employee, was originally scheduled to hear the official allegations against him at an administrative hearing today and be able to respond. That hearing was postponed.
He and a subordinate, Norma Haygood, were put on leave with pay in January after audits discovered they might have violated rules about how much pension money can be taken out and for how long.
Giles earned more than $98,000 in 2008. His three-bedroom house on Samson Lane in Silverton went into foreclosure last year, a process held at bay by his filing for bankruptcy in February. The bankruptcy filing lists his assets at $122,610, but his liabilities at more than $177,000.
• http://news.cincinnati.com/assets/AB135184520.PDF">Read Giles' bankruptcy petition (PDF)
Among his debts: more than $14,000 in state and federal taxes; almost $18,000 in federal student loans; and thousands to credit card companies, payday lenders, collection agencies and department stores. The bankruptcy filing also listed child support, but did not say how much Giles pays or owes.
Giles' money problems are prompting the city's internal audit manager, Mark Ashworth, to propose that the city's policy on financial disclosure be strengthened and applied to more employees. He's working on a plan that will suggest a financial records check for "anybody who's got a decision to be made that could be corrupted by money."
Now, the city requires department heads to file financial disclosure forms, but the forms focus on whether the employee has personal money tied to any city contractors.
The $1.83 billion Cincinnati Retirement System, which has been in the news for losing $854 million last year, allows contributors to take out loans of up to $50,000 of their contributions and pay them back over five years. There are limits to the number of loans.
Giles took out 20 loans in the past seven years, according to one audit.
The Enquirer requested from the city Tuesday the personnel files of Giles and Haygood, but has not yet received them. Haygood has worked for Cincinnati since 1980. She earned more than $61,000 last year.
Neither Giles nor Haygood could be reached for comment. Giles' bankruptcy lawyer, Eric Steiden, also could not be reached.
Ashworth's office did the 2007 and 2008 audits that found the discrepancies in Giles' and Haywood's personal loans. His auditors found that Giles essentially refinanced his loans repeatedly, taking out 20 loans in seven years. Rules required a third loan to be fully paid before any subsequent ones.

posted by Kathie Bracy at 9:03 AM

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