PA Citizen Plans Pension Board Suit

April 23, 2004 (PLANSPONSOR.com) - The flap over goings-on at the Luzerne County (Pennsylvania) Retirement Board shows no signs of abating with word that a local citizen is suing over the county's $35,000 legal payment to defend Controller Steve Flood in a defamation suit.

Resident Wil Toole filed court papers notifying Flood and the board of his litigation plans, according to the Wilkes-Barre (Pennsylvania) Times Leader. Toole told the newspaper that the suit was designed to contest the board’s payment to a Philadelphia law firm for its defamation suit services.

According to Toole, Flood has refused to release records pertaining to the matter, despite his written requests. Toole doesn’t want to see the fund paying for legal expenses that weren’t properly authorized. “The defamation suit was a personal issue,” Toole told the newspaper. “If he had a personal car accident he couldn’t expect the fund to pay for it. The pension fund had nothing to do with it.”

Flood contends he and fellow Retirement Board members Mike Morreale and Stephen Urban agreed to pay for the defense during an open May 2003 Retirement Board meeting when it appeared the county’s insurance policy wouldn’t cover it. Flood said he and the other two board members believed his defense should be paid by the county pension fund because the defamation suit stemmed from a radio interview in which he spoke as county Retirement Board secretary.

The $35,000 in payments were not publicly separated from other bills to the same firm – Schnader, Harrison, Segal & Lewis LLP – to pursue a racketeering suit. The Retirement Board’s federal lawsuit is 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.

These alleged violations, in turn, led to the county pension fund hemorrhaging   more than $60 million from 2000 to 2002, the country contends.   While 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.

However county officials objected to the board using pension money to pursue the legal matter. The county alleged that legal costs will climb to more than $2 million and that legal expenses are and will continue to do irreparable harm to the pension fund’s assets and to benefits that should be paid to retired county employees  (See PA Country Seeks Halt To Pension Funds Used for Legal Fees ).

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