Defendants in PA County Pension Battle Ask For Suit Dismissal

December 19, 2003 ( - Four current or ex-members of a Pennsylvania county retirement panel who have been hit with a lawsuit by fellow commissioners have asked a federal judge to toss out the lawsuit.

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.”