Defendants in PA County Pension Battle Ask For Suit Dismissal
The federal court lawsuit, which was started by the present majority of the Luzerne County ( Pennsylvania) Retirement Board, seeks up to $75 million in damages for allegedly mismanaging the county employees’ pension fund that lost more than $60 million from 2000 to 2002, according to a news report in The Citizens Voice.
Named as co-defendants were commissioners Tom Makowski, Tom Pizano, former commissioners Frank Crossin and Joseph “Red” Jones, and 21 others who include former pension fund consultants and money managers. The lawsuit also alleges that Makowski, Pizano, Crossin and Jones paid excessive fees and commissions to consultants and money managers in exchange for political contributions to assist in their re-election campaigns.
Makowski, Pizano, Crossin are asking US District Judge Richard Caputo to dismiss the suit because they argue that the suit fails to legally establish the allegation that they violated federal anti-racketeering laws in their pension management and that the complaints were filed too late. Caputo didn’t immediately rule on the dismissal request.
The fund was worth $203 million in 2000. It dwindled to
$141 million by 2002. The pension consultant at the time
said the losses were due to dismal stock market
performance.
According to the suit, Morreale, Flood and Urban, soon
after taking control of the retirement board in 2002, fired
long-time pension consultant ASCO Financial Services (a
defendant) and replaced it with Merrill Lynch. They
subsequently liquidated all pension assets, fired the old
money managers, hired new ones and reallocated pension
assets for re-investment.
Noting that Morreale has been a member of the Retirement
Board since 1988 when ASCO was hired by the county, the
suit charged. “Treasurer Morreale’s role in ‘investigating
the plan’s investment history,’ voting to terminate
investments and investment contracts and voting to file
this action is suspect at best and disingenuous at worst,”
the suit claimed. “By statute, all moneys and securities in
the fund shall be placed in the custody of the county
treasurer for safekeeping. Thus, Treasurer Morreale, more
than any other board member, should have known what
investments were being made, how those investments were
performing and what fees and costs were being incurred for
those investments.”
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