MPERS sues JPMorgan Chase

The beleaguered Louisiana Municpal Police Employees Retirement System is seeking class-action status in a suit it has filed against JPMorgan Chase and Company.  MPERS wants the status so they can join with other groups who bought JPMorgan Chase common stock, alleging that the company ‘made false and misleading statements and concealed information relating to the company’s trading practices, hedging of risk, risk management, and exposure to risk of loss’.
JPMorgan lost $2 billion as a result of what was described as ‘egregious mistakes’.
The suit was filed in U. S. District court for the Southern District of New York.

City to cough up more for MPERS

Another increase is in the works for the Louisiana Municipal Police Employees' Retirement System.

In 2010 the contribution rate for municipalities jumped from 11% to 25%, now it is going to 31% in the fiscal year beginning July 1^st.  Let that sink in – 11% to 31% in two years.

If you will remember, the last increase came when Bossier City was facing a budget crunch and contributed to cuts in Public Safety.

Individual contributions also have increased.

I have blogged about the MPERS mess on a couple of occasions, particularly about investments locally in Olde Oaks and Stonebridge that have been big money losers.  Another bad decision was to help finance Hal Sutton’s Hill Country development, and then the decision to subordinate a first mortgage on that property in order for him to acquire more from a bank.  The system lost about $30,000,000 in that alone.

Add to that $1,000,000 plus that was embezzled by the system’s attorney, although that has been, or is being reimbursed. 

“It was like a gigantic playhouse,” says Nick Congemi, 68, chief of the Greater New Orleans Expressway Police in Metairie, who for years criticized the system’s leadership and investments. You can read that account here.

Bossier City officials were aware that another increase was coming and are prepared for it.

Doubtless this is one of the reasons that the council nixed a proposal to give a 2% raise to all city employees and to hire 8 new police officers.

Councilman David Jones was the only vote in favor of the raises and hiring new officers.

The ongoing story of MPERS

In the ongoing story of MPERS, an interesting side note.
MPERS has sued both Bossier Parish and Bossier City to refund the ad valorem taxes they paid for 2010. This is the first year that they have done so.
MPERS paid, under protest, $190,166.70 to the Parish and $13,967.67 to the City for 2010.
In January they filed suit against both the Parish naming Larry Deen as Tax Collector and Bobby Edmiston as Assessor. They also filed against the City, naming William Buffington, Finance Director.
The suits were filed by Kimberly L. Robinson of the Baton Rouge law firm of Jones Walker.
The suits maintain that they are exempt because according to their theory, they fall under the Louisiana Constitutional definition of “public lands, other public property used for public purposes”.
I’m not a lawyer, but the “used for public purposes” doesn’t seem to fit (in my opinion) golf courses.
The lawyers and the judge will figure it out.
It just seems a little strange to me that they paid the taxes for all of those years, and now want to challenge the assessment.
I suppose desperate times require desperate measures.
We will have a lot more on MPERS in the very near future.

MPERS lawyer sentenced - more convictions to come?

Today the former attorney for The Municipal Police Employees' Retirement System (MPERS), Randy Zinna, was sentenced to 30 months incarceration in Federal Court for stealing more than $1,500,000 from several sources.
I have blogged about MPERS on several occasions, here and here, particularly zeroing in on some bad investments.
One of those, of course, is Olde Oaks in Bossier Parish, which the system sunk more than $15,000,000 into, yet it ended up with a net worth of just over $3,000,000. Because of mismanagement of the system, police officers across the state are having to pay an addition 2.5% of their salary into contributions. The amount that the municipalities involved must contribute has risen exponentially.
The $1.2 billion program went from fully funded to $836.3 million short of meeting future retirement obligations.
Zinna was ordered to make restitution of $501,318.11 to MPERS and $136,614.10 to Olde Oaks. He also must make restitution to the Employers’ Retirement System for East Baton Rouge in the amount of $340,392.93, as well as $546,351.82 that he had swindled from a widow.
Zinna could have received up to 20 years in prison, but the U.S. Attorney filed a report indicating that Mr. Zinna should be allowed a three-level downgrade for sentencing guideline purposes due to his cooperation with the investigation and assistance with respect to other potential violators.
That’s where it gets interesting. I wouldn’t be surprised at all if more indictments follow.
More complete articles here, here and here.

MPERS

MPERS – The Municipal Police Employees’ Retirement System has been in the news in a very negative way in the last couple of years. Due to some very bad and questionable investments the system is in serious difficulties.
Add to that a budget crunch in most municipalities and you have a recipe for disaster.
As you can tell from the letter below, taken from MPERS website, a contribution of almost 25% of salaries will be required from the participants to maintain the system. This is in addition to a 7.5% contribution from the individual officers.
The 25% is up from 11% last year.
One of the main problems has been investment in golf courses, the first of which was Olde Oaks, another being Stonebridge.
On top of failed investments in those cases, a $30,000,000 guarantee for Hal Sutton’s development of The Boots in central Texas has gone sour.
To fully understand the investments, read this article in the Baton Rouge Business Report.

March 19, 2010
TO: City Clerks and Chiefs of Police
FROM: Kelly Gibson, Chairman
RE: Contributions to MPERS
The Municipal Police Employees’ Retirement System has received inquiries asking for an explanation of the increase in employer contributions for this year. For a historical review and an in depth explanation of this increase I consulted the actuarial service used by MPERS (Mr. Charles Hall) and I am including his response with this reply.
The Public Employees’ Retirement Systems Actuarial Committee reviews returns of investments of the state wide retirement systems from the past year and mandates the salary percentage needed to keep the retirement system solvent. This year the committee determined that a contribution of 32.5% of salary was needed. Employee’s contributions are frozen at 7.5% thus requiring a contribution of 25% from the municipalities.
I realize that the employer’s contribution rate is a significant increase from the previous year. The downturn in the equities market and real estate market in previous years were the dominant reason for the increase. The MPERS board of trustees is exploring ways to reduce the burden of the percentage increase on the municipalities.

I haven’t investigated this in any depth, just familiarized myself with the basics just as you are doing here.
My question would be who advised the board to make these investments? Was it advised by professional investment counselors or was it decided by political considerations?
In what universe would something so risky be considered a decent investment for a retirement system?
This was one of the problems with the Bossier City budget last fall that ensured layoffs and cutbacks in the Fire and Police Departments.  I will dig into this more in the next few days and try to come up with some answers.