Thursday, March 30, 2006

Milwaukee County Files Important Lawsuit

A $100 million lawsuit filed by Milwaukee County yesterday against the actuarial company that gave support to the infamous county pension deal of 2000 is significant. If the county can recoup that money, it would go a long way toward helping its fiscal position.

I have no idea how long these cases usually take, but considering the Mercer Human Resource Consulting firm generates annual revenues of $12 billion, I imagine it has plenty of time and money to spend on its defense.

What’s really amazing in the Milwaukee Journal-Sentinel article on the lawsuit are a couple of quotes that come toward the end.

When the pension deal was making its way through the approval process back in October 2000, the county personnel director at the time, Gary Dobbert, explained to the Pension Study Commission how the plan would be cost-neutral based upon the actuarial projections of Mercer.

If there would’ve been any hints at the time that the plan wouldn’t be cost neutral, it’s likely it would’ve been shot down by the Pension Study Commission. As it was, the plan passed the commission by a narrow margin and then went on to pass the county board shortly thereafter.

A Mercer actuary, Dennis Skelly, was present at the meeting with the Pension Study Commission. Skelly later testified that he wasn't aware his firm had ever investigated the cost-neutrality of certain important aspects of the pension plan--he claimed to be "surprised" when Dobbert made this assertion before the Pension Study Commission.

So when asked by investigators why he didn’t speak up at the October 2000 meeting and correct Dobbert, he explained that he “didn’t want to make Dobbert look stupid.”

And if that one doesn’t get you, try this one on for size by another one of the Mercer actuaries, Glenn Soderstrom, who did choose speak his mind at the Pension Study Commission meeting.

Soderstrom bluntly promised the commission in October 2000: “There is some degree of uncertainty, but I am convinced I will never come to you and tell you, ‘Supervisor, please pony up $20 million next year.’ You would have the right to kick me in the rear end on that account because I think we would have warned you about the potential and surprises.”

As it turns out, after the pension deal was brokered the Pension Board only had to ask the county supervisors for $20 million once in 2003.

The next year it had to ask for $44 million.

Where do you suppose he should let us kick him for that one?


Blogger said...

Oh, what's that, is it... well yes it is.

It's the sound of vindication.

And the clouds part, and the angels sing....

Ok, maybe today I've got a bit of a flair for the dramatic but now I can ask stupid people who accusingly inquire me why I voted for the pension plan, why they're idiots and when did they realize that they were idiots?

Mercer and his actuaries knew. One of the things that burns me is that now Walker knows that the entire basis for his rise to power was fraud. I already know the board didn't know and it's safe to say that Ament didn't know.

If Walker admits that Ament didn't know, he's admitting that his misdirected bashing of the last four years was bullshit. His career is over. If he comes out and says he was wrong (fat chance) the county may be back on the right footing financially (if they also win the Mercer lawsuit) but Walker will be seen as a demogogue.

This has podcast written all over it. How about you, me and Jason team up to podcast this?

March 30, 2006  
Blogger Robola said...

Nice catch, Zach! I'm going to link to your story later today, along with Jim's comments. This deserves much more attention in the blogosphere than it appears to have received.

March 30, 2006  
Blogger Seth Zlotocha said...

Thanks, Robola. I agree it's a story that’s not getting enough coverage in the blogosphere.

As Jim points out, the ramifications are big--both in terms of the fiscal position of the county and the political atmosphere, as well.

Not only did Walker get quite a boost from the story, but the reputation of Sykes and Belling increased greatly with their attacks on Ament and the county board. And it created a well for them that they haven't been shy about going back to repeatedly on other issues related to the county government and other governments, as well.

If it turns out the board and potentially even Ament were deceived into approving the plan by Mercer, then that would fundamentally change the legacy and political significance of the deal.

I'd be happy to join in a podcast on the issue, Jim.

I've just recently started investigating the background of the story since I wasn't living in Milwaukee when it originally took place (I was off at college), but I'm doing my best to play catch up now. I probably won't have as much to add as you and Jason, but I'm certainly willing to participate.

March 30, 2006  

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