Administration March 2, 2004

Judge: Pension Funds Not For Legal Expenses

February 3, 2004 (PLANSPONSOR.com)—A judge ruled that the Luzerne County Retirement Board cannot use money from the county pension fund to pay legal fees in a federal civil racketeering suit, upholding an injunction from late last year.
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The Retirement Board was spending money on a federal lawsuit it filed seeking the recovery of $75 million.   The suit charges violation of federal civil racketeering influenced and corrupt organizations (RICO) violations and alleges Majority Retirement Board members and 24 former pension consultants or money managers were paid excessive fees and commissions from the pension fund in exchange for donations for political reelection campaigns (See  PA Country Seeks Halt To Pension Funds Used for Legal Fees )

After three days of testimony, County Court of Common Pleas Judge Mark Ciavarella ruled that there was evidence showing that legal fees hinder the fund’s security, unless the fund is infused with new money.   However, such money will not exist, since the judge noted that taxpayers are expected to provide more than $9 million to subsidize the fund for 2003 and 2004, reported the Times Leader, a Pennsylvania newspaper.

The Retirement Board has already used $400,000 from the fund in preparation for the litigation and had budgeted another $500,000 for 2004, the Times Leader said.

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