US Bankruptcy Judge Larry Lessen ordered the fund to reimburse the sum, which includes the $770,000 that the judge said was stolen by accountant Ronald Stern, plus interest. The judge made the determination based on the fact that the fund’s fiduciaries were aware of Stern’s illicit actions, but did nothing to report them, according to a Miami Herald report.
In November 1998, the leaders of a Miami police pension fund suspected Stern had ripped them off of more than $1 million, Lessen ruled. Instead of reporting him, the pension board members, pressured him to repay their investment after an audit exposed the theft. This action was taken because the fund had made investments in Stern’s fraudulent tax-exempt bond fund dubbed the Florida Fund, the collapse of which ultimately led to Stern’s suicide. Before his untimely demise, Stern repaid the retirement trust $771,757, all taken from other investors in the fund between December 1998 and March 1999.
The pension fund “committed all of these acts in order to influence, exert control over and, in the words of (Police Chief Donald) Warshaw, to ‘squeeze’ (the Florida Fund) to repay the prior debt,” the judge wrote. Lessen cited a deposition from Warshaw taken in September 2001, before he went to prison for one year after pleading guilty to stealing from a Miami police children’s charity.
The Miami police pension has between $85 million and $90 million in assets for roughly 1,100 police officers. The trust, run by five current or retired Miami officers, is one of two police retirement accounts; the other one was not affected by the scam.