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Public Pensions Betrayed by Fraud and Abuse?
Elliot Blair Smith of Bloomberg reports, Runaway Public Pensions Betrayed by Fraud, Abuse:
The
deal came together behind the doors of a Louisiana psychiatric ward.
John Skannal, 74, signed a document in October 2003 authorizing the sale
of land handed down through eight generations of his family.
The buyer was a statewide pension plan
for municipal law officers. The fund assembled golf and real estate
holdings that lost 84 cents on each dollar the police spent on them over
10 years. The losses are emblematic of a decade in which the $1.2
billion program went from fully funded to $836.3 million short of
meeting future retirement obligations.
The nine trustees of the Municipal Police Employees’ Retirement System
made a series of decisions that taxpayers and 10,748 active and retired
cops are now paying for. The board embraced bad investments, ignored
warnings of weak financial controls that enabled its attorney to steal
$1.2 million and set up conflicts of interest among its advisers,
according to a review of thousands of pages of documents obtained under
the state public records act and more than 50 interviews.
“It
was like a gigantic playhouse,” says Nick Congemi, 68, chief of the
Greater New Orleans Expressway Police in Metairie, who for years
criticized the system’s leadership and investments. “These people have
taken the futures away of good, decent law-enforcement officers who
thought they could depend on this for the rest of their lives.”
$479.6 Billion Deficit
The
irregularities in the Louisiana police plan show how trustees and
employees of U.S. public pensions, operating with little or no oversight
or transparency, can cost taxpayers and threaten the retirement income
of government workers. Assets held by state systems are $479.6 billion
less than what is needed to fund estimated obligations, according to
official financial reports compiled by Bloomberg.
“The
failure to govern public pensions appropriately inevitably hurts those
who can least afford it: retirees, workers and taxpayers,” says Eleanor
Bloxham, chief executive officer of Value Alliance, a Westerville, Ohio,
governance consulting firm. “Such lapses can produce even greater harm
than traditional financial crimes prosecuted by law enforcement.”
In
California, Democratic Governor Jerry Brown brought civil charges last
year when he was attorney general against a former CEO and a former
board member of the $233.5 billion California Public Employees
Retirement System, the largest in the U.S. State and federal proceedings
are continuing. In March, Calpers documented six years of unreported
gifts by members of the board and employees, and improper awarding of
investment contracts that paid excessive fees.Cuomo Probe
Before
becoming New York’s Democratic governor, Andrew Cuomo probed corruption
at the state’s $140.6 billion pension fund when he was attorney
general, leading to eight guilty pleas and the payment to the state of
more than $170 million.
Alan
G. Hevesi, the former Democratic state comptroller who was the
program’s sole trustee, was sentenced today to a minimum of one year in
state prison after admitting he approved pension- fund investments in
exchange for almost $1 million in gifts.
“I publicly disgraced myself,” Hevesi told a Manhattan judge at his sentencing hearing. “I have only myself to blame.”
Randy P. Zinna, 53, the former attorney for the Louisiana
police fund, pleaded guilty last year to mail fraud after state and
federal investigators accused him of embezzling to pay sports-gambling
debts.
Louisiana’s 13 statewide plans had
unfunded liabilities for fiscal 2010 of $20 billion, with enough assets
to cover 65 percent of estimated obligations, according to their latest
financial statements.Funding-Review Panel
Among
45 U.S. states reporting data for fiscal 2009, Louisiana ranked 41st
based on proportion of future pensions covered by assets, according to
data compiled by Bloomberg. The Legislature next month will consider
recommendations by a funding-review panel to increase mandatory
contributions and require governance changes.
The
law-enforcement fund, known as MPERS, was the fourth- worst funded
among statewide plans. The program’s assets were 2 percent lower last
June 30 than a decade earlier. Kelly Gibson, a Lafayette police
lieutenant who is the board chairman, declined to discuss previous
decisions.
“The only comment I will make
is that the current board is working to correct any problems that face
MPERS,” Gibson said in an e-mail.
Over the
U.S. Independence Day holiday in July 1999, three police-retirement
board members spent four days at a golf resort on Monterey Bay in California
at the pension fund’s expense. It was a “due diligence” investigation
of a potential “real estate investment,” according to their expense
reports.Former Pawn Shop Owner
The
trustees were led by Bossier City Police Captain Bill Fields, a
Corvette-driving former pawn shop owner who chaired the pension’s
golf-course committee, and its vice chairman, Willie Joe Greene, a
retired captain from nearby Keithville. Fields, now 58 and retired, and
Greene, 73, declined requests to comment for this story.The
third member of the West Coast trip was retired New Orleans police
Sergeant Larry Reech, 62, who says the trio visited golf courses on a
former military base in which the New Orleans Firefighters’ Pension and
Relief Funds had invested.
“We were
looking at how they were being run, what kind of draw they had -- what
kind of clientele -- where they were coming from, the demographics,”
Reech says.As for the stewardship of the board, “oversight was lacking,” he says. “There were mistakes made.”
Cotton Plantation
The
committee was in the hunt for golfing properties near the homes of
Fields and Greene in northern Louisiana, pension records show. It was
close to the peak of the U.S. golf boom.
At
the time, Fields cited the success of golfing investments by the
Alabama Retirement System, the records show. He zeroed in on the Olde Oaks Golf Club
in Haughton, Louisiana. With fairways lined by oak and cypress trees,
the course was built on rolling hills carved out of a former cotton
plantation owned since 1846 by the family of John Skannal, the man who
later sold the officers’ fund an adjacent piece of land.
The course was designed by the professional golfer Hal Sutton, a Shreveport celebrity known for having defeated golfing legends Jack Nicklaus and Tiger Woods.
Even after a consultant’s report said that construction was incomplete
and some cart paths were damaged, the police fund paid $6.8 million to
buy the property in July 2000, $400,000 more than recommended by GVI
Consulting of Santa Ana, California, according to the police system’s records.Playing Olde Oaks
Fields
and Greene frequently played at Olde Oaks, enjoying a 50 percent police
discount and riding a reserved cart, according to Ben Chavarria, the
course manager. Even as the business generated losses, the pension
poured $2 million more into upgrades. In the years since, the retirement
system has spent $15.3 million to own and manage a property with an
appraised value of $3.2 million, pension records show.
“If
we bought a golf course, you would think that it would be a moneymaking
venture,” says Congemi of Metairie, whose department patrols the
24-mile (39-kilometer) causeway across Lake Pontchartrain.
The
Olde Oaks investment was a departure from the conventional blend of
stocks and bonds that defined the pension program’s strategy for most of
its 37-year history, based on plan records. The system’s holdings came
to include undeveloped real estate, foreign currencies, hedge funds and
high-yield fixed-income instruments known as junk bonds.Surplus in 2001
The
system had a $14.1 million surplus in the fiscal year ended June 30,
2001. Until the following year, trustees authorized annual
cost-of-living increases to retirees. The average yearly pension in the
program is $23,183. Under the plan, officers contribute 7.5 percent of
their pay and qualify for benefits about equal to their salary after 30
years.
As pension reserves slipped to a
$195.2 million deficit in 2002, the trusteesrevised their investment
guidelines to allow greater risks in pursuit of increased returns, board
minutes show. The new policies included exemptions for investments in
raw land and below-investment-grade debt.
The
retirement system also doubled the payback period for its unfunded
liability to 30 years beginning in 2003 and raised the assumed rate of
returns in 2006 to shrink the growing deficit. It was akin to
refinancing a mortgage by extending the term of the loan and paying only
interest without reducing the principal.‘Poor Investment Choices’
In
July 2004, three police chiefs, including William Landry of Gonzalez,
sued the fund’s trustees in state court. The complaint sought a
restraining order to halt “glaringly poor investment choices” that
included golf courses, a $3 million headquarters building in Baton Rouge
for the program’s staff of six and business trips by the board and
consultants to Monterey, Las Vegas, San Diego and San Francisco.
“It
was like see no evil, hear no evil, speak no evil,” says Landry, who
has since retired. “It was cops ripping off cops. That, to me, was the
biggest slap in the face.”
Less
visible to members and state overseers, the board also eroded internal
checks and balances by undercutting the independence of two professional
advisers, according to the records and interviews.
With
no public discussion of potential conflicts of interest, the trustees
in August 2006 hired their independent actuary as chief investment
officer. This gave him the dual responsibility of selecting the
investments he had a duty to independently evaluate.
The
actuary, Charles Hall, insisted on working at his Baton Rouge home and
set his pay at $40,000, with the board’s consent. No other candidate was
considered for the job, according to board minutes.Hall’s Dual Role
With
Hall as CIO until January 2007, the board bought $2.1 million in Lehman
Brothers Holdings Inc. uncollateralized debt that has since lost 75
percent, as well as $201,916 in Goldman Sachs Group Inc. home-equity
loans that have lost 49 percent, pension records show. Lehman entered
bankruptcy proceedings in September 2008.
“To
be completely independent, you cannot be the investment officer and
serve as the actuary,” says John Sondergaard, retired actuary for the
state’s fiscal watchdog, the Louisiana Legislative Auditor. After the
agency informed the board it was concerned about Hall’s dual role, the
trustees dropped the CIO position in January 2007 and retained him as
actuary. Hall wasn’t accused of any wrongdoing.“I
think they were right. It was a conflict,” Hall says, adding that he
was only trying to assist the board. He says he doesn’t recall the
Lehman and Goldman investments.‘Just Looks Bad’
In
March 2006, trustees voted to buy hedge fund investments through Summit
Strategies Group of St. Louis, which would collect commissions on the
transactions. The board was also paying Summit $250,000 a year to
independently screen money managers and provide advice on hiring them. The
$70 million that the trustees agreed to pour into hedge funds would
double Summit’s compensation. It took the board 19 months to address the
double role it created.
“It’s not
illegal; it just looks bad,” Bossier City Police Chief Mike Halphen, the
board chairman at the time, told Dan Holmes, a Summit managing
director, at a meeting in September 2007, according to a recording. The
trustees began unwinding the investments.
Holmes,
who consulted for the board and presented the hedge fund investment,
said in a voicemail that the relationship didn’t constitute a conflict.
The
use of independent consultants as money managers drew criticism in the
internal investigation of Calpers, the California retirement program.‘Could Raise Questions’
“It
is difficult to see how an external manager could objectively advise
Calpers on appropriate levels of management and other fees for its peers
and competitors when that advice could raise questions about the level
of its own asset- management fees,” the Steptoe & Johnson LLP law
firm in Washington said it its board-commissioned report.
The
Skannal family, who owned the Sligo Plantation underlying the Olde Oaks
golf course, was land rich and cash poor. John C. Skannal once worked
as a state trooper and drove Governor Earl Long home from a mental
institution during his final term in office in 1960, according to his
son A.C. Skannal.
Just before the elder
Skannal’s 75th birthday in October 2003, a business partner named Dennis
Bamburg visited him in the psychiatric ward of a Shreveport hospital
where Skannal was being treated for dementia and alcoholism, according
to a 2005 lawsuit the family brought against Bamburg in state court.Witnessing a Signature
Bamburg
obtained Skannal’s signature authorizing him to sell a piece of land
next to the golf course, according to the lawsuit. Bamburg was
negotiating with Fields of the police pension and a local representative
of the fund, James Harris, 53, according to trial testimony. The police
wanted to develop the land as a residential community.
In
December 2003, the police board approved the purchase of 208 acres (81
hectares) and 70 lots from Skannal and Bamburg in three transactions
that totaled $5.9 million, according to pension fund auditor’s records.
That same month, the trustees hired Harris as property manager for its
planned Olde Oaks development, a job that paid his firm, Twin Peaks LLC,
almost $2 million over six years, not including five lots that he
received as additional compensation, pension records show.
At
the closing in February 2004, four representatives of the police fund
-- Fields, Greene, Harris and Zinna -- witnessed Skannal’s signature and
later testified he appeared to be of sound mind, in the family’s
lawsuit against Bamburg. Skannal had been hospitalized for 112 of the
previous 189 days, and his medical records ran to 8,000 pages, Skannal’s
lawyer, John Odom of Shreveport told a state judge.‘Grossly Impaired’
After
the elder Skannal died in November 2005, his heirs carried on a suit he
had filed eight months earlier in state court against Bamburg to
overturn the deal. In March 2008, Judge Ford E. Stinson Jr. ruled that
Skannal had been “grossly impaired” and that Bamburg had committed civil
fraud in obtaining the signature. Zinna, Fields and Greene never told
the pension board they testified at the trial, according to former
chairman Halphen and other board representatives. Fields retired from
the board in December 2004.
Bamburg, 63,
declined to comment for this story. In the trial, he argued that Skannal
had been of sound mind in the transaction. A state appeals panel partly
overturned the lower court decision, and Bamburg remains in control of
much of the former plantation.
As the
residential development got under way, Zinna diverted pension-fund money
from lot sales and payments to contractors to pay for his
sports-gambling addiction, according to subsequent state and federal
investigations.Accountants’ Warnings
The
police board already had evidence of financial irregularities in Olde
Oaks-related investments from its independent accountants, New
Orleans-based Duplantier, Hrapmann, Hogan & Maher LLP, board
documents show. In a 2002 audit, the firm reported that unexplained
discrepancies included $105,000 the pension plan transferred to the golf
course that didn’t show up on the club’s ledger and $26,125 in
“undeposited funds” that no employee could explain.Duplantier,
Hrapmann issued warnings each year even as trustees compounded the
money-losing investment by buying another golf course in the Bossier
City-Shreveport area -- at a sheriff’s auction -- and an undeveloped
golf course community near Fredericksburg, Texas.
The
board spent $73.4 million on three properties that are now worth $11.7
million to the plan, according to the system’s auditors. Homeowners and
businesses may also have been cheated.‘Zinna Took the Money’
Chester
Pitts, a 61-year-old heavy-equipment contractor who lives at Olde Oaks,
wrote two checks to the pension system totaling $158,612 in March and
April 2005 for an option to buy 48 undeveloped lots, according to copies
of the checks and a one-page contract prepared by Twin Peaks.
While
Zinna endorsed the checks, bank copies show, the pension fund never
received the money and Pitts never got the lots, according to both
parties.“The problem is that Zinna took the money,” Pitts says. Zinna denies that and says Pitts is owed nothing.
The
trustees removed Zinna from managing Olde Oaks in April 2009 and asked
another attorney, Randy Roche, to investigate. A title search at the
county courthouse revealed that Zinna never deposited $725,563 in
proceeds from as many as 22 Olde Oaks lot sales or even reported the
transactions to the retirement system, Roche says. In addition, court
records show, Harris signed for the police pension as the seller and for
himself as the buyer in one $15,000 cash sale.
Checks
for hundreds of thousands of dollars that the staff wrote for
contractors were never delivered, Roche says. Zinna endorsed the checks
and deposited them into his firm’s trust account, doling out slow and
partial payments, Roche says.Widow’s Savings
In
September 2009, Zinna took most of the $570,000 entrusted to him by an
unidentified 83-year-old widow and applied it toward what he owed the
police, according to the federal criminal investigation. A month later,
Greg Phares, chief investigator for the state Inspector General, served a
subpoena and seized records at Zinna’s red bungalow office.
Zinna
resigned from the pension system that month. He had diverted $5.1
million of police funds to himself, most of which he repaid, while also
misappropriating $1.5 million from the police board and two other
Louisiana public retirement systems, according to his plea agreement
unsealed in January.
The Legislature plans
next month to take up recommendations from the funding-review panel to
increase taxpayer contributions that have almost tripled in less than a
decade to pay for pension benefits, losses and expenses, according to
the police plan’s most recent actuarial report.Baton Rouge Budget
In
Baton Rouge, the jump in pension costs amounted to $5 million last
year, according to the city’s budget report. That is equal to 100
officers’ salaries, according to salary.com, a unit of Wayne,
Pennsylvania-based human resources consultant Kenexa Corp. The city has
frozen staff positions and is budgeting no raises.
Individual
police officers also face the likelihood of paying more for their
pensions. The state panel suggested raising their contributions to as
much as 10 percent from 7.5 percent. Municipal authorities pay an amount
equal to 25 percent of police payrolls into the pension system, up from
11 percent last year. They would pay 28 percent in the fiscal year
beginning July 1 under state actuarial guidelines.
The
state review panel also proposed restructuring the police pension board
to include two mayors, an appointee from the Treasurer’s office and a
representative of the state’s chief budget officer, giving taxpayers a
direct voice for the first time. While two state legislators have been
designated honorary trustees, neither has attended a board meeting in
about a decade, board minutes show.Awaiting Sentencing
As
for Zinna, he still goes to work as he awaits sentencing, setting out
bowls of food and water for the stray cats that visit him on his law
office’s stoop. He faces as many as 20 years in federal prison. The
state Supreme Court suspended his law license in July, and in December
he allowed his state accounting certificate to lapse.
Stephen
Street, the state inspector general who led the investigation with U.S.
authorities, says that criminal law fell short of addressing all of the
police pension system’s shortcomings.
“Randy
Zinna is a symptom of a larger problem over there, which is a lack of
oversight, a lack of accountability,” Street says. “You can’t conclude
anything other than that.”
That
last sentence pretty much sums it up, lack of oversight and lack of
accountability. It makes me angry reading about fraud and abuse at
public pension funds, but it doesn't surprise me. It's a subject I've
covered many times before. Unfortunately, many small and large US plans
lack proper governance and internal controls which leaves them
vulnerable to flagrant abuse.
The Association of Public Pension Fund Auditors has excellent references and links, including a link to the Association of Certified Fraud Examiners. I highly recommend consulting with certified fraud examiners to help prevent fraud and abuse at public pension funds. Prevention,
internal controls, proper oversight and accountability are necessary to
combat fraud and make sure pensioners don't pay the price for
mismanaged public pensions.
»
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I for one am shocked that public funds in Louisiana could be less than morally pristine! You have broken new ground here Leo. I would stay near the phone for the call from the Pulitzer Prize people. Well done!
But don't stop working on that background piece called "Canadian Public Funds: The Ultimate Lemmings" in preparation for the coming market crash...
Corporations Own the Lobby!
The Lobby Owns the Government!
Law Enforcement works for the Duly Elected Lobby Whores!
We the People = Screwed!
All I care to say about all those lil piggy's having to suffer is "GOOD"! / "Karam is a Bitch"! They are part of the Corrupt System and they are Dumb but they are Not! Dumb Enough Not! to know they are Owned by Corporations.. which now have Fucked them like the rest of us! Welcome to the Club Lil Piggy's! Welcome to the Fucking Club!
They thought they would be protected... ala' No Union Rule Changes for Law Enforcement! but everyone else can suck wind!
Do you think the Republicans understand that the Liberals are trying to save them all from a Lynch Mob? When the Majority of People are Hungry and Pissed Off.. things will get ugly, I almost would rather Donald Trump come in and apply Tax Breaks for those who Pay NO! Taxes already and Austerity Measures for the Majority (and growing) Poor Population here in the United States! Things would get settled just that much sooner.
http://goo.gl/cgg4O General Electric $14.2 Billion in Profits, Pays $0 in U.S. Taxes
$39M Dollar Lobby in 2010 $14B in Profits =’s NO TAXES PAID! http://goo.gl/rZLDY
$10 billion sale of F.D.I.C.-backed debt http://dealbook.nytimes.com/2009/01/06/ge-capital-begins-10-billion-debt-sale/
Tax Break? Media Force Feeding the Populace Bullshit 24 hours a Day!
Line up You $100k - $20m Conservatives!! Line up and Be Fleeced! How are those absolute return funds doing for ya? LMFAO! Suckers!
General Electric $14.2 Billion in Profits, Pays $0.00 in U.S. Taxes
...and sold Nukes to Japan with zero future liability on their equipment
these sociatal parasites (and mega Govt public-private partnership bum-chums) are masters of 'getting away with it'
Several years ago my Canadian employer gave me the option of staying with the tradional pension plan or getting a bonus to my 401k. Sometimes I wonder if the decision to go with 401k option was a good idea and then I read something that Leo posts and my worries for the future go away.
Thank you for reinforcing my dislike of company pensions.
Leo, you and GW sound exactly alike with your "if everybody would just do right" nonsense.
People are NOT going to do right. Trusting ANYONE else with your money these days is INSANITY.
WE'RE TIRED OF HEARING IT FROM YOU AND GW.
TAKE YOUR WHINING / BITCHING / COMPLAINING SOMEWHERE ELSE. GO AWAY. STOP POSTING ON ZEROHEDGE.
The ONLY reason that this condescending, arrogant statist douchbag Leo is even allowed to post his bullshit on this website is to serve as a lightning-rod for righteous indignation and outrage, and to generate forum participation and debate --- Tyler personally admitted as much in an email to me himself when I questioned him on why Leo's pro-status-quo, pro-Establishment crap is allowed to be posted on this site, when it routinely speaks against everything that ZeroHedge otherwise stands for and upholds. What this says about the integrity of this site, I leave for others to decide for themselves.
But in any event, the "contributions" of Leo here are not intended as serious or intelligent analysis, merely as fodder for heated exchange.
Leo is a boot licking "Liberal", who believes that the state fixes everything.
Every "Liberal" that I know from Canada at their core, are nothing more than a bunch of statist, anti-American, self-righteous, leftist lackeys that would push their own mother under a #uckin bus if it meant that could get to the trough first.
Leo stick to counting pennies for a living.
HEATED EXCHANGE. That is what this country needs,
how hot is napalm?
TD's most important job is to protect ZH from the danger of being viewed primarily as an intellectual monoculture. Even the choir gets tired of hearing the preachings of a like-minded set of choirmasters over time.
so some police robbed some other police of some money in the pension ponzi.....couldnt happen to a better group
POLICE FATALLY SHOOT UNARMED MAN - Laying Face Down and Shot in The Back http://www.youtube.com/watch?v=IAHjhtYZpX0
the Police are Nazi's everywhere.. http://www.youtube.com/watch?v=G63FEamhpA0 A nice Lady shot in the back and face, with rubber bullets.
Fuck the lil piggy's! and New Orleans? is the bottom of the barrel with regard to Law Enforcment.. 2 FBI shut downs and how many murders during Katrina? burning the bodies in cars behind the police station.. LMFAO! KARMA IS A BITCH!!!
"crooks with badges" as an ex-Marine said in a blog i read recently about his local Police force ...same in Britain where they're totally incompetent at catching real criminals and spend their day robbing Joe Public with 100's of petty fines
the parasitical State is the biggest enemy of the people, the 'enemy within'
"New Orleans .... good, decent law-enforcement officers"
Why does the word "oxymoronic" scream out of this post? Call it La La Leolandia.
You read my mind! wow.I was sitting here thinking that when
i scrolled down to your post. These "law enforcement officers" take an oath to uphold
the constitution and then set about a career ignoring it.Towing away peoples cars (private property) and fining them for expired tags,DUI without an injured party,failing to appear on a parking ticket or any number of alleged infractions of the law.
How many blue collar men of all races are forced to live under the radar in the USA because they are convicted in abcentia by the bimbo that took the kids and split while he was cracking through another 12 hour shift,but
lose it all (career,home,car,paycheck,drivers licence and liberty) because Betty got bored and ran away with Joe Millionair, No fault divorce? WTF!
And while I am venting,' Louisiana!' Who woulda thunk it?
Their never was a crooked cop or politician in that entire state!
Shouldn't the cop's be out getting the bankrobbers? But who are the bank robbers? it is not the doofus in the skii mask,he is a mere rebelious peon, invented by the real bank robbers to distract the friendly slaves, the real bank robbers are at the head office in NY.
I am not a believer in Karma,but the folks I have met who do believe in Karma tell me "Karma is a bitch". Sorry about my typing, not thrilled with the ZH comment box,
ZH itself is awesome.
Uhhh....golly, you think it might be a tad fraudulent? What a fucking revelation.
I laugh when people say that Social Security is a Ponzi scheme and then turn around and advocate personal responsibility where individuals should save money for their own retirement by investing in the stock market.
you're laughing but you haven't got a joke... people should invest locally or nationally (whatever they feel best with) but i'm advocating more local small business. The problem as it stands is local money is being hoovered up by large national institutions attracted by the corrupt collusion with Govt of tax breaks. That's what 401K's (and ISA's in the UK) are all about. To shutter small local pension providers with unfair competition and suck money out of local communities and into national slush funds. Anything with a tax break you can bet your arse it's big monopolists colluding with Big Govt and they're up to no good (pensions are just another Fat Cat scam)
If we are to recover from recession we need small business to do it, they are 90% of the economy. The problem we have is Big Bad Banks getting bigger and pension money being centralised. Neither institutions are good at getting money into small business. Big Corps, like Big Govt and just like Big Pensions only likes dealing with other Big Everything. 'Big' is the one consistent thing that is failing everywhere in this recession. For the sake of recovery and for the sake of peoples own financial health we need lots more small.
One woman who is well aware of the 'tape worm economy' that is going on in big banks and pension funds has been systematically bullied by bankers and the US Govt in her efforts to provide an alternative with localism. She told a story of local people that had savings and wanted to invest while their friend needed seed money to start a small business. But they never thought of investing in their freinds business. Instead her small local bank recommended a national 401k pension with its tax breaks and the money was sucked up the bank/pension system out of the local community into some Champagne Charlie national fund, her friend having to go to the bank to get a loan at a double-digit rate that was 3-4 times more in interest than her friend was getting from the 401k. Madness!
We need to stop thinking big because nothing is crapper than big (as big banks and big Govt and big pensions are proving), and think small and local and personal which alwys works much better (for our interests)
Well where do you think hose funds came from huh, the taxpayer via local and state taxes. I view this as mismanagement of public funds and a great example of how high taxes went down the shitter. Wonder why the taxpayers revolt against increases in taxes. On the margin, besides your example which is wost case, increasing taxes just hopelessly go to patch up past failures.
You are missing the bigger problem
Dear Pension Fund Manager Dudes and the Dudes and Dudettes that Sell Investments to 'Em:
RE:
"...program’s sole trustee, was sentenced today to a minimum of one year in state prison after admitting he approved pension- fund investments in exchange for almost $1 million in gifts."
In the spirit of our Randian/Greenspan, Objectivist, Laffer curvacious, "Cato"-tonic and Neo-everything economic paradigm... I'll happily perform the same function for a mere $800,000! (can I get that in gold coins?)
This should give ample opportunity for us all to do very well together for at least a little while and really... what's a year after all... and food and shelter are getting expensive out here in the real world.
So its like killing two birds with one stone!
Please send application form...
Citizens Under Attack
Everything Obama, Geithner, & Bernanke do, they do it all for The Banksters.
Many people have lost their homes. Many more are paying inflated rates on inflated properties which the banks refuse to refinance. Savers are getting lousy rates on CDs, but are charged 10%-24% on a credit card. From the top of the credit menuboard to the bottom, The Banksters have FREE REIN to suck as much blood out of the middle class as they possibly can. It’s a criminal plan that TARP was paid for by The Taxpayers to save the banks from extinction, only for them to revive and viciously attack the hands that feed them. Henry Paulson should be charged with Treason for using The Taxpayers' Money to re-arm The Banks of Mass Destruction. Everybody is a victim, even the homeowner without a mortgage, his equity is dropping in its entirety; he's losing more than the guy with a mortgage. Condos sit empty because banks don’t want to pay associations’ maintenance fees, while those fees rise for the rest of unit-owners to make up the shortfall. The Banking Cartel is waging a war against every American Citizen, and it won’t be happy until every savings account is drained, every homeowner is broke & evicted, every credit card holder is “paying” 24.9% + $88/ mo. in overlimit and late fees, and every house is in their possession. Even the foreclosure process is financially draining for the owner, with insurance and electric payments continuing until property is taken out of owners’ name, an average of 2-3 years. (Upon repossession, the bank doesn’t book the loss until resale, artificially covering-up insolvency issues). Wake up people, its not us against each other, its Us vs. The Banksters who run their operation with impunity.
Further details of the covert TARP program, “Where the Bailout Went Wrong”, by Neil Barofsky:
http://www.nytimes.com/2011/03/30/opinion/30barofsky.html?_r=1&scp=1&sq=barofsky&st=cse
Wells Fargo Lobby!! Buy Congress and the Senate http://www.opensecrets.org/lobby/clientsum.php?lname=Wells+Fargo&year=2010
Bank of America Lobby Dollars*** PLUS*** http://www.opensecrets.org/orgs/summary.php?id=D000000090
JP Morgan has so Many Names to Lobby with http://bit.ly/fuRwmg JP Morgan 1 thru ?? Can Lobby The MAX, PER!
Goldman Sachs has how many names to Lobby with? Not as Many as JP Morgan!! http://www.opensecrets.org/orgs/summary.php?id=D000000085
Where do these Banks get the Money to Lobby with? The Government Silly Goose! http://www.newyorkfed.org/markets/tot_operation_schedule.html#
JW, Thanks for the postings.
This is the real story. The banks support the Congressmen (or women) who are reliable and make it well known. Those elected feel the need to avoid offending principal contributors. After all, who put them in office? Having watched the electoral process for a long time, the issue of who scratches who's "back" is a very real one. IMO, some good people simply "wear out" and capitulate.
"The Legislature is taking up legislation to increase TAXPAYERS CONTRIBUTIONS which have trripled recently to make up for losses and shortfalls?????" Are you Effing Kidding me? What benefit does The Taxpayer get from their contributions? This Treasonous Assault on The Taxpayers HAS GOT to end. The privatized gains and socialized losses are bullshit. Henry Paulson set a dangerous precedent when he circumvented Congress' intent for EESA and TARP. Raise taxes to cover losses?
On another note, rarely do I read that any pension fund has SOLD their rotten investments and gotten out of the risk game. That only tells me that these funds are willing to ride their losses down to Zero. If everybody is trying to get back to even and above, it ain't gonna happen. Not when the banks and now municipalities are sucking the lifeblood out of the American Taxpayer, there's not enough money to go around.
Of course they don't give a fuck they can just FORCE the taxpayers to make up the shortfall when idiots like Leo invest like morons or just suck at investing.
California is boned too.
Lots of news from there this week.
Zero Brains,
We have seen the results of people doing their OWN investments. It's a DISASTER!
Don't scratch poor Leo too hard. If you do, you'll find out that there's very little below the superficial veneer.
i AM SO SORRY LEO, that i had to junk you. But, the story you have written shows WHY and HOW playing with other people's money gets you into deep trouble and WHY in your own words it is a disaster....... If the people in your story were playing with their OWN money they wouldn't have been golfing and driving their special cart and thowing 10's of millions of dollars into that same golfing while simultaneously not caring if the golf course was actually able to turn a profit
Leo, this can't be yelling match in the schoolyard, which is what they want. They are trying to instill a false sense of omnipotence, a delusion that the lone American cowboy hero, armed only with his pistol, his wits, his cynicism and the ruthless greed he learned at the end of his father's paddle can beat the army of machines single-handedly.
They are in pain, like the bikers in Road Warrior. What has caused their pain is real. Things aren't working. You agree with them, in this regard. They attack you because they can't attack the people who have hurt and betrayed them. Don't take it personally. Their fury must be addressed, not dismissed. We cannot survive alone. Everyone, deep down, knows this.
CDSkiller "We cannot survive alone. Everyone, deep down, knows this."
Yes let's depend on 'Big' and 'institutions'. My aren't they doing well; Govt (bankrupt), big banks (bankrupt), big insurance companies (bankrupt), big car Co's (bankrupt), big pensions (bankrupt). Your 'Big' isn't doing too well is it Mr Delusion?
So who is bailing out these bankrupt arseholes? ...the small (individual) taxpayer and small business that pays the overwhelming majority of tax for these insolvent bailouts
Small appears to be more stable, smarter and wealthier than your Big, dumb and bankrupt.
What was your point again about small needing big???
Kockupalotis "We have seen the results of people doing their OWN investments. It's a DISASTER!"
You mean more disasterous than the pension industry? Do people who look after their own pensions commit fraud or piss their money away on overly generous fees?
I think you'll find people that look after their own money and savings are considerably better than 'professional' pension institutions. They will be the ones that'll see themselves through this recession not the 'industry of broken promises' that you are trying to prop up.
Regards your other point about the investment community being "too sophisticated" we've been able to trade on stock markets since the 90's. But I'd actually recoomend people invest their money locally rather than in these huge casinos. I'd like to see a strong resurgence of localism instead of the 'game' Wall Street and bamkers in Europe is trying to centralise peoples (local) money into national slush funds.
If we are to get a recovery we need local people with local savings investing in local small businesses (90% of the economy). These big pension dinosaurs are perpetrating the problem of centralisation and nationalising sucking money out of communities into mega-squid organisations (that's the purpose of central Govt giving tax breaks to 401k's or in the UK ISA's, to attract the money into national funds and out of communities)
History has proved people as individuals are always far better and safer bets than big fat slow moving dinosaur institutions. The people are smarter than Govt. People are smarter than bankers too judging by how many Big 'smart' bankers have gone bust. Big is crap. Institutions are crap. Individualism beats them all ..every time
What a fucking hypocrite - isn't the article about a bunch of PENSION FUND managers that fucked over the investors? Indivuals might not make the best investment decisions but at the very least they won't be stealing from themselves.
True enough. There is collosal ignorance of things economic. It is a subject which is not even mentioned, let alone taught, anywhere in our K-12 educational system.
Maybe by about the third grade we could start teaching some simple stuff, like using credit cards will eventually bankrupt you. Build on that, and by the time you are a HS grad, you might be able to have a basic understanding of the system, meaning you will buy physical PM.
The track record of the pension industry and the legions of financial advisors (mutual fund salesmen) hasn't been stellar either Leo. There is more dignity in self reliance and personal responsibility than the blind faith encouraged by you and others in the investment industry and the subsequent whining and pleas for taxpayer bailouts when they fail to provide. Living gracefully in old age should not be so complicated and challenging that individuals can't do this on their own. Your insistence that people should not arm themselves with knowledge of financial markets is self serving. This campaign of learned helplessness does not serve people well.
Winisk,
True, but a great many of the populace do not have the intellectual capacity to navigate the markets; much less the crooked, fixed, rigged, HFT, different rules for different fools markets of today.
Even intelligent investors can have efforts of 10, 20, 30 years squashed by favoritism, recision of share and bondholder rights, oppressive and confiscatory taxation, immoral and illegal government interventions, and outright graft and theft by the insiders.
Politicians and bankers have engineered the situation so that the only game in town is a rigged deck and game at a poker table of thieves and cutthroats playing with your parents life's savings.
If we abandon the fortunes of the less fortunate, we abandon our own fortunes.
Oh no we wouldn't want the masses to be responsible or empowered - if that happened Leo and his ilk would be unemployed LOL
Well said Winisk!
It is only to serve as a lightning-rod for righteous indignation and outrage that this condescending, arrogant statist douchbag Leo is even allowed to post his bullshit on this website --- Tyler personally admitted as much to me himself. What this says about the integrity of this site, I leave for others to decide for themselves.
Leo:
Your headline reads like "Gravity is a force keeping us on earth"
Wrong. People can invest on their own and should.
This is a systemic issue. The faux regulators, and a monetary policy hell bent on destroying currency make it damn near impossible for individuals to work, raise families, and invest successfully. Fix those two issues and then people can invest. Worked great in the 50's and 60's when the public started embracing investing. (BTW, at that time public pensions worked great. Boring. very little equity exposure. but it worked.)
These two issues have nothing to do with the corruption in public pensions. (well, maybe a little more oversight by regulators could have helped.....) Folks faith in public pensions is amazing. Think Weimar GENERALS turned into panhandlers, circa 1921...
Public employees need to pull their heads out of the sand and defend themselves, not their beloved leadership. Your leaders have a well documented record of screwing you....so quit going home! Leave them! Minimize your exposure to their oversight and start your own financial rescue plan.
BTW, I manage my own retirement, and the returns have been insanely good. I had gone along with conventional planning for my kids college with 529's and gave the responsibility to a big name outfit. Of course, the one thing I worried about, a systemic failure, happened in 08 and the accounts dropped exactly w/ the market. I pulled the money, managed it myself, accounted for tax affects, and currently, the returns have outperformed dumb and dumber by at least 50%, now exceeding fully recovered. It looks like they will not only get college, but a chunky house down payment...of course, my investing simply takes advantage of the systemic issues (read dollar debasement- thanks, public unions, for your assistance in creating the situation).
My point is people can do it themselves.
How can people do anything when they're financially illiterate? Let's get real here, most expert money managers have a tough time with these markets dominated by computers and algos and we expect Joe and Jane Smith to do well over the long term? This is delusional and dangerous. DC plans have underperformed DB plans and individual RRSPs or 401Ks. A bunch of traders here who mistake luck for skill are commenting without a clue of what is going on out there. Get real, please. I do not have time for cocky traders who think they're better than Soros. I am more concerned about pension poverty than anyone. I see the writing on the wall "leaving people do their own investing" and it isn't pretty!
Wow, and pension fund managers did a bang up job into 2000 and after. For that matter 2008 until today. And before you gloat that the market is back at 2008 levels, 401(k) and the like are far from caught up. The truly illiterate are these "professional" fund managers.
401(k) are the biggest ponzi scheme on the planet. Taking younger worker inflows to pay older worker obligations -- minus fees and commissions of course. Quarterly reports look great except when you need to take money out.
So what does a 401(k) provide. A menu of select financial fund groups that the plan sponsor has a vested interest in. Plus the fiduciary gets to charge big juicy fees for agent recommendations, transactions, etc as well as suckering participants to take loans against their retirement. And the participant gets the great right to sit and trust his plan sponsor/admin to do the right thing. Bullshit.
Why not allow the individual to make those choices. An individual doesn't need to compete against algos for their retirement. An S&P Fund or tracking fund shoulde be more than adequate for most younger participants. They don't need to trade in milliseconds on a daily basis and on a time weighted average WILL DO BETTER than trying to game the system like these "professionals" do with less risk profile.
Pension funds are the next brick to drop. We will see PGBC(in America) more and more in the financial headlines as these wonderful "pension fund managers" screw their participants and dump the responsibility on the taxpayer.
Wait till 2013 when the demographics shift in the US and baby boomers have to convert 401ks. The stock market thud will be heard around to world and these "professionals" will be nice and flush with their management fees and commissions and participants are told to "hold for the long term". The younger participants will be bent over and dry penetrated.
Seems to me we should have both. Unwise olds shouldn't have to eat cat food or garbage, but not be rich. I'd fold it into the overall social safety net, probly just socialized medicine of some kind and a 10,000 a year national divided for everyone, or some such.
LOL what a crock of shit - how many pension fund managers suck vs how many are outperforming the market? Without providing that information your entire article and comments are nothing more than your biased opinion.
All people are stupid and need to herded to safety by the Wall Street shepherds.
You're a real genius.
On that reasoning why should we accept your opinion. After all it's evident you are not an authority on anything of any consequence, so why should we allow you to voice your opinion? After all, it's not like we could expect you as the average guy to understand how to teach investing, or even how to express you opinion properly that doesn't reek of condesecending bullshit.
I think what I'm trying to say is that you're a fucking idiot, and it's unfortunate that you think the rest of us are as well.
Why beholdest thou the failing pension mote in the individual's eye, and not the failing pension beam in the eye of the State?
Like a true Canadian, the answer for you is ALWAYS more government, more abdication of individual responsibility, more power to institutions and authority. You sicken me, Leo.
"Like a true Canadian, the answer for you is ALWAYS more government..."
And like a true american, the answer for you is more empty rhetoric. Check the numbers...Canada is obviously doing something right. Canada is not socialist, merely open to some forms of central cooperative planning. Only in America could a government get away with actually passing a law that forbids states from banding to gether to group their medical purchases, thereby saving taxpayers a hell of a lot of cash. There is no law anywhere that says you have to take all of 'free' enterprise or all of 'socialism'. You take what works and leave the rest.
There is no part of institutionalized coercion and social organization at the point of a gun (i.e., statism) that "works" --- or that works for anyone except those who wield that power.
You're dealing in sweeping generalizations as viewed through a narrow US lens. It's a big world out there, and not nearly as black and white as you believe.
Slartibartfast "Canada is not socialist, merely open to some forms of central cooperative planning."
Typical of a socialist you can't see when you make idiotic statements like that.
How many times has central planning and collectivism failed? Try everytime thumb sucker. Where would you like to start? How about cantrally planned countries (USSR and the rest of Eastern Europe, China, North Korea, Cuba, Britain, Japan etc) all of which drove the entire country into the toilet
The reason is very simple, because their monopolist Govts hoarded power (decison making) and have no competition. Without end-users/citizens taking decisions of what suits them best all sorts of centralised idiocy ensue in every aspect of the industry or service. And without competiton the breed does not improve at their optimum rate. Crap doesn't go to the wall, it gets served up and thrown down consumers throats (because they have no choice, and no competition to walk away and take their business to)
This is why the USSR served up the pile of crap Trabbant, while the West served up Mercedes, Minis, Jaguars, Toyotas and BMW's. Not only did the centrally planned State serve up total shit but it also went bankrupt while the West grew expodentially.
But you socialists and progressives (closet Commies) ike Leo live in LaLa Land. You don't see the abject total failure of socialism, central planning and collectivism. Because you're not taught real history, you're taught to hum a mantra of collctive good'ism that ignores every time it's tried it fails, miserably