Pension Suit Prediction Proves Prescient

June 1, 2004 ( - The Ohio Attorney General's assessment on an employee bonus plan for one of the state's pension funds could wind up being used against the state.

Columbus lawyer Michael Szolosi is using an opinion by Assistant Attorney General John Patterson to sue the State Teachers Retirement System (STRS) for at least $1.8 million in unpaid employee bonuses that the pension board voted to deny last week, according to the Cleveland Plain Dealer.

Probably “Cause”

Divided 5 to 4, the STRS Board of Directors decided against awarding the additional $1.7 million in bonuses that had been promised to 268 noninvestment staff for work done in the fiscal year that ended in June 2003. This despite the legal opinion of Assistant Attorney General John Patterson, who told the board employees would probably win a lawsuit if they were denied the bonuses because they had been promised to them in written agreements (see STRS Board Approves Only $2 Million in Bonuses ).

Patterson wrote the opinion for STRS, which released it publicly. It said, in part, “If STRS fails to pay the incentives and it is sued, the likelihood is that it will lose the suit” – a five-page opinion came with 22 pages of legal citations.

“I relied on it greatly,” said Szolosi, a Columbus lawyer who filed the lawsuit Friday in Franklin County Common Pleas Court. “I was happy to see it”, according to the Plain Dealer.

Fire Storm

A year ago, under fire for awarding $14 million in employee bonuses during a period where the fund lost 21% of its assets – some $12.3 billion – the system suspended all employee bonuses (see Ohio Fund Wants A Closer Look at Bonuses ). However, despite that public criticism about STRS spending patterns (see Ohio Pension Fund Hit for Lavish Spending Practices ), concerns that eventually culminated in the in the resignation of former system director Herb Dyer (see Dyer Steps Down From Ohio STRS Post ) – and pressure from retirees to deny all the bonuses, the board voted in the same meeting (7-2), to pay a total of $2 million in bonuses to 102 members of the investment staff.

The attorney general’s designee on the board voted against paying any of them, saying, “The probability of a lawsuit is not a certainty.”

Szolosi represents five members of the non-investment staff: Thomas Scott of Mount Vernon; Marvin Moore of Columbus; Donald Van Loon of Delaware; Dwayne Lane of Canal Winchester, and Carmen Fenton of West Jefferson, according to the Plain Dealer.

The report says that Szolosi has asked the court to certify the lawsuit as a class action on behalf of all 268 non-investment staff members. The bonuses range from $416 to $46,574, according to the lawsuit, which seeks an unspecified amount of interest, attorney fees and punitive damages.