Politicians who helped port of public pension funds of Chicago at Brink of insolvency

"The policeman middle ... don't know what is going on with the Board," said the police instructor Damon Stewart. (Josà © m. Osorio, Chicago Tribune/8 November 2010)Chicago's public pension funds are teetering on the brink of bankruptcy, largely because the city officials and Union leaders repeatedly exploited the system draining away billions of dollars in the last decade to serve short-term political needs, has found an investigation Tribune.

Once the funds have been used as a bargaining chip or a piggy. Politicians cut budgets by offering incentives for early retirement and greased Union contract deals with performance increases. "Pension holiday" allowed the city avoid paying in workers ' pension funds.

Consequently, funds soon may not be able to keep the promises that are encoded in the State Constitution, threatening the retirements of tens of thousands of human and trade union members leaving taxpayers on the hook for billions of dollars owed to teachers, police officers, firefighters and others.

A review of tribune of legislative changes, driven by city officials and Union leaders over the past 15 years has found that the regulations governing the contributions and the performance of city pension funds have changed almost 40 times, often with little debate on the financial consequences.

In most cases, pension fund managers had no idea how bad their changes are done. But 10 that the Tribune was able to monitor the long-term impact on pension funds was more than $ 3.6 billion.

These losses, together with pension fundamentally flawed Illinois ' funding process and of little return on investment, have pushed the unfunded liabilities of eight guest houses financed with city tax dollars by approximately $ 3.3 billion in 2000 to at least $ 20 billion, a staggering 500 percent.

Although all pension benefits have been cut off today, every man, woman and child in Chicago I owe more than $ 7,000 to cover the obligations already incurred — an amount that does not include the public pension debt of approximately 60 billion.

"What happened in Chicago is a reckless disregard for the next generation of taxpayers and employees," said Jeremy Gold, an expert on national pension counseling of public and private pension funds. "Their birthright has been sold out from under them because they will be able to pay for the services and benefits which have been rendered before grew while they are cut to save money."

Pension crisis Chicago could stain the legacy of Mayor Richard Daley, who was at the helm of the Government of the city for the past two decades and the appointment of some of the Trustees of the city's chief financial officer of the city boards. The Board, Gene Saffold, said that the problems that plague the city public pension funds are not unique in Chicago and have been driven largely by the worst economic climate in more than 70 years. Said the possibility of money running out of money "is purely hypothetical and speculative."

"The city's goal Is to ensure that the funds remain solvent without additional charge for taxpayers," said in a written response.

Options for addressing these shortcomings are not enough. I want to try first? Vote and share your ideas on the Trib nation.

This has not always been the case. Pensions have completed successfully for decades and, just 10 years ago, were relatively well funded. Retirement of teachers was close to 100%, funded in 2000. Municipal workers had levels above 90% financing. Workers of the city was enough resources to cover 133% of their liabilities. City police Pension, traditionally underfunded, passes around 70%.

Later this year, however, not one of the levels of funding pensions will be above 70%. The funds of fire and police are already under 40 and Municipal Fund is less than 50. Retirement Experts say funding levels below 80 percent point the long-term viability of pensions at risk and are almost impossible to overcome without borrowing massive tax increases, painful cuts to benefits and increase the contributions.

Decisions taken a worse system flawed

While the pension system broken Illinois ' caught the news throughout the country, relatively little attention has been paid to the looming crisis in Chicago.

City pension funds have been established to provide retirement security for tens of thousands of city workers, engineers, administrators, teachers, bus drivers, police officers and firefighters. Most do not participate in the federal social security program, and the vast majority receives benefits modest averaging about $ 40,000 a year, the Tribune found.

Most also do not understand their future is at risk.

"The policeman medium, now, don't know what is going on with the Board," said Damon Stewart, 34, an instructor of police training recruits to the Chicago Police Department, after having spent six years on the beat in Roseland and earn a degree in law.

Stewart puts money into the Fund Board with every paycheck, but says he has no illusions to receive a pension after he retires. Raised in Detroit, he saw firsthand how pension funds could go bankrupt.

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Public pension funds of Florida make interactive million payment for intermediaries

By Kris Hundley, co-author of periods
In print: Thursday 7 October 2010

Public pensions of Florida has invested approximately $ 2 billion in two dozen private funds since December.

Rather than a personal approach of the Board directly, half of the funds used intermediaries to obtain the port. These agents have paid placement ben million dollars to make introductions and setting up meetings. Media finder fee: approx. 1.5 million.

Fund managers of Florida at the Board say through agents of positioning is cause for concern and routine. But after these intermediaries were found to be at the core of public pensions Kickback scandal in New York and California, have taken more stringent stand.

New York State pension has banned the use of placement agents. California has put limits on their remuneration and compensation plans to send them on the website of the State pension.

And just last week, in the wake of the problems to public pension funds, the Securities and Exchange Commission started requiring registration of placement agents.

Ashbel c. Williams, Jr., Executive Director of the SBA, boasted that the rules of Florida are even more stringent. He said Investment Advisory Council of his Agency last week: "our policy goes beyond the SEC we need disclosure of the compensation you paid."

There's only one catch: Williams ' definition of disclosure does not extend to retirees or the taxpayers of Florida. His agency you get to know what brokers are paid. But the public — said that retirement investments are made on merit, not about who you know — unable to discover how much money has changed hands before a deal went down.

The reason? SBA does not release information if investment fund wants to keep it secret. And all they do.

For example, Florida recently invested $ 100 million of pension funds with GSO Capital Partners. The company said reveal what is paid a placement agent would "give our efforts business."

Baloney, says Christopher Tobe, a veteran of financial advisor and trustee of Provident Fund of Kentucky. Tobe is among the growing number of experts say funds that third parties to use, rather than going directly to a pension plan, are perpetuating a useless and poorly regulated system that proved vulnerable to abuse.

"It is blatant corruption," he said. "There's really no reason to employment agencies, unless you want to get money to someone through the back door."

For some months last spring, SBA does give fund managers the positioning option agent pays by the public records of requests for exemption. In seven bids where taxes were communicated, placement agents received a total of approximately $ 12 million, approximately 1.5% of total investment of Florida of 825 million.

The Commission reported lower $ 250,000 was paid by Energy Capital Partners, a private equity firms, to Group Hill Park for "schedule meetings." Florida invested $ 100 million with Energy Capital Partners.

P2 Capital Partners, meanwhile, got the same result — a pledge of 100 million US dollars — but paid his placement agent, C.P. Eaton, 3.65 million. Eaton Duties? "Establish relations LP (limited partner)".

Knight Vinke signed an agreement of 250 million dollars with Florida and paid his placement agent, XT Capital Partners, up to 1.25 million dollars for the services which is described as "strictly Ministerial".

Because some funds did feel the need to pay a third party for execution of interference with the State, while the rest are landed at approximately the same investment total without extra costs?

"Perhaps were not as attractive a Fund," said Tobe, the trustee Board of Kentucky. "They had to have some extra juice."

Girard Miller, a former member of Governmental Accounting Standards Board and veteran Fund Manager, remember that pensions as Florida already pay millions of dollars of independent consultants to screen potential investments.

"So why on Earth is required for legitimate investment advisers and a sectoral pension fund responsible for hiring a mercenary?" Miller asked in a column in Governing magazine last year.

Florida typically pay a fund 1 to 2% to manage its investment, so that a deal of 100 million dollars could mean that more than 2 million to the Fund Manager. Placement agent Commission is generally taken by the management costs.

Williams, Executive Director of the SBA, said the fact that the fund managers pay placement agents mean that cost nothing public.

But Susan Lerner, head of common cause of New York said that taxpayers end up paying the price. "The funds that use these brokers negotiate a fare management a little higher so that nothing comes out of their profit margin," he said.

"Taxes get passed. The audience is paying for it. "

Miller, who was involved in both sales and purchase of funds placement agents called "a gross cost of the investment industry".

"Having sitting on both sides of the table to final presentations for 25 years, '' he wrote," I can tell you that there's really no added value to marketing analytical process that cannot be delivered by players keys. "

Recently blew the whistle on Tobe Fund of Kentucky, when he learned that placement agents is paid $ 15 million in taxes since 2004 after years of denying that and used such intermediaries. In response to its allegations, the SEC has opened an informal inquiry into Kentucky last month.

Tobe and Miller suggests that if placement agents are used, their fees should be reduced to approximately 200,000 dollars. Miller "that still rewards a marketing expert to present the benefits of an investment product for a large Fund," he wrote.

In New York, Deputy Comptroller and different placement agents and guilty of fund managers for performance of a system of remuneration-play at the public Board. The pension has recovered more than 120 million dollars from parties accused of wrongdoing.

In California, a former Board Member CalPERS shot placement agent is accused of taking more than 50 million u.s. dollars of funds in exchange for management for retirement. CalPERS now encourages funds to submit their proposals online.

"There is no reason for them to pay someone to call or to set a meeting," Chief Investment Officer CalPERS Joseph Dear said in June. "Our door is open."

Kris Hundley can be reached at khundley@sptimes.com or (727) 892-2996.

[Last update: 07 October 2010 04: 00 PM]

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