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RETIREE NEWS
Lawsuit seeks equitable state funding for Chicago pension system
By Al Korach
 On February 16, 2002,
Arne Duncan, Chief Executive Officer of the Chicago Public Schools announced
that the Chicago Public School System is filing a suit against the state
of Illinois. The suit addresses the issue of equitable funding for the
Chicago Teachers’ Pension System. For years the disparity between
the funding of the Chicago system and the downstate systems has grown
larger year by year.
There is a growing
fear among system administrators that if this trend continues the city
may have to contribute about $300 million to the pension fund between
the years 2004 and 2007. This would come out of the systems general fund
and most likely cause an increase in the property tax. President Deborah
Lynch of the Chicago Teachers Union supports the board action.
I spoke with Mary Sharon
Reilly, president of the pension board on February 20. President Reilly
indicated that the Public School Teachers’ Pension and retirement
Fund of Chicago would become a party to the lawsuit with the Chicago Board
of Education.
I was encouraged to hear that Alliance Capital Management is not one of
our money managers. President Reilly also indicated that the fund’s
loss to Enron is less than I reported. It is less than $5 million.
The fund now has forty
money managers in various categories. I can remember about 25 years ago
when I was on the pension board with only one money manager.
I encouraged President Reilly to set the record straight regarding the
fund and Enron by issuing a newsletter to the contributors and retirees.
I know that the fund’s loss would not endanger it. With all the conflicting
news and reports in the papers regarding public pension funds and Enron
it would be to the funds best interest to issue an informational statement.
Who says that this
is not the land of opportunity? Where else but in America can a CEO who
just left his position with $30 million dollars stand before a congressional
investigating committee and say, I don’t recall, I can’t remember,
they didn’t tell me, etc. etc. All this is taking place while many
of those doing the questioning have received political campaign donations
from his firm.
Does this situation
have implications for those that are dependent on public pension funds?
You had better believe it does. Why is your Substance retiree reporter
placing such emphasis on this subject? For most of us our entire future
is tied up with the knowledge that our pensions will be there when it’s
our turn to retire. This is what the Enron employees believed.
I must compliment one
Enron executive for not taking the fifth but with all the info he provided
he could have just as well taken it. Now, after the fact, the Feds are
going to try to oust the Enron execs as pension trustees. The Labor department
is investigating whether they violated their legal fiduciary duties to
the companies 401 (k) investors as per the Employee Retirement Security
Act of 1974, or ERISA which governs employer provided retirement plans.
The 20,795 participants
in Enron’s 401 (K) plan had about 63 percent of their assets invested
in Enron’s stock. Many employees lost 70 to 90 percent of their retirement
assets. As I have said in previous articles, “When the lawyers get
through sorting this mess out and taking their fees next to nothing will
be left to the workers and investors.”
What is missing as
of the submission of this article is a public statement from the Chicago
Teachers Pension fund, the Municipal Fund and other public state funds
regarding their losses in Enron if any. Alliance Capitol Management Corporation
a money manager used by the State of Florida Teacher’s Pension Fund
purchased 7.6 million shares of Enron for the Florida fund. 2.2 million
shares were purchased after October 22, when it was announced that the
S.E.C. was into an Enron investigation.
One of Alliances Capital
Management’s executives Frank Savage, a major Democratic donor, was
a board member of Enron while his firm was a money manager for the Florida
State Pension Fund. Alliance sold all Enron shares just two days before
Enron declared bankruptcy. The state retirement fund lost $325 million
on Enron stock and another $9 million on Enron Bonds mostly at the hands
of Reliance Capital Management. Is there a Chicago link to Enron and Reliance
Capital Management in the public pension area? I feel that all public
and labor pension funds should all make a statement at this time regarding
their situation as it relates to their Enron investments and losses.
During my ten years
as a trustee and VP on the Chicago Teachers Pension Fund, I always had
confidence in the fund’s financial advisors, accountants and auditors.
I also felt that the money managers would be interested in doing their
very best so as to be able to continue in the fund’s employment.
The Enron debacle has brought us into a new ball game. It seems that we
have to keep an eye out for those that are supposed to keep an eye out
for us. Even the confidence in Olympic judging is gone. It seems that
nothing is sacred anymore.
Public pension funds
across the United States have lost more than $1.5 billion due to the sharp
decline in their Enron holdings. For example: Ohio pension funds lost
$114 million, California teachers $49 million, New York police and firefighters
$109 million. While this is going on former Enron chairman Kenneth Lay
took the 5th, cashed in between $20 and $100 million in stock and now
sold his Aspen cottage for $10 Million. Again! Who says this is not the
land of opportunity. This is better than the TV’s Sopranos.
There is now a sort
of panic among accounting and auditing firms as the Enron debacle casts
a wary eye on their operations. It has been discovered that some of these
firms employ former executives of the very firms they are auditing. Arthur
Andersen is now beset with many present and future lawsuits. Will they
survive? Enron employees argue in their lawsuit that the firm of Arthur
Andersen helped to hide Enron’s true fiscal situation and caused
losses of over $1.3 billion from their retirement funds.
Meanwhile back in Chicago,
Teddy the terrible is still disrupting the House of Delegates meetings.
Getting back to the “Land of opportunity” $92 million a year
is spent on school superintendents in the State of Illinois. There are
891 hanging in at top dollar. Do you remember, “Chop the top?”
It seems that Florida has joined the administrator’s march to the
big bucks. Florida International University trustees have voted to give
President Modesto Maidiques a salary boost of $83,000. Big salaries equal
larger pensions. Mr. Tom Reece former head of the Chicago Teachers Union
is still top dog when it comes to big pensions. Substance would like to
interview Mr. Reece but we are at this time not having any luck.
You will recall that
last November Tony Gentile former head of the Broward Teachers Union here
in Florida resigned from his job. After meeting what he thought was a
14-year-old girl in an on line chat room rendezvous he found out that
it was a policewoman. Tony Gentile will begin serving a 46-month sentence.
He has received $140,000 in severance from the union.
I find it amazing at
this stage of my life to constantly read about the shortage of funds to
adequately operate our school systems. While I ponder this national dilemma
I read that the TV stars of the sitcom Friends will each receive $1 million
apiece for each episode of Friends. It sort of makes one wonder what in
the hell is happening in this country.
Florida living and “breaking free”
This is my third year
out of Chicago and ninth out of the school system. Do I have any regrets?
Yes! I’m sorry that I didn’t do it sooner. The late start had
to do with what I wrote. If you’re married and one partner is not
sure of the move and change in lifestyle, hold back until both are in
agreement. Marlene loves the Florida lifestyle and our many new friends,
many from the Chicago area and from the teaching profession. The compromise
at this time is that we will live here for five to six months and return
back home late in April.
I was very lucky to
meet a great group of senior motorcyclists and we have already taken some
great trips. Last week we went to Lake Okeechobee and had some great fish
dinners. This month we are leaving for Daytona, Florida to participate
in “Bike Week.” The trip will then proceed to New Orleans and
back. Now I ask you! Doesn’t this beat subbing or listening to Teddy
the terrible moaning on the House of Delegates floor? I had a little spare
time and I just finished a 3rd bedroom/study in my condo.
Medicare will now cover
eye exams for glaucoma. Seniors at risk can now have an annual dilated
eye exam under improved medical benefits. February 11, 2002, was the deadline
for those applying for the executive director’s position at the Retired
Teachers Association of Chicago. I’m hopeful that an announcement
will be made in March as to RTAC’s choice. For a wealth of general
pension information and related subjects try the pension fund’s website
at www.CTPF.org.
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