New Mexico Pension Reaches Settlement With Ex-Chairman Marred By Scandal

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Bruce Malott, the ex-chairman of the $11 billion New Mexico Educational Retirement Board, is currently the defendant in five separate lawsuits stemming his handling of pension investments, which were allegedly marred by conflicts of interest.

Mallot resigned from the pension fund as a result of the controversy. But he claimed that the Retirement Board should pay his attorney fees accrued during those lawsuits. The Board initially refused, but Mallot sued the board over the fees, and today the Board has agreed to pay $125,000 worth of his attorney costs.

Reported by the Albuquerque Journal:

The Educational Retirement Board has paid its former chairman, Bruce Malott, $125,000 to settle a civil lawsuit he filed to recover money for legal representation in lawsuits arising from a state investment scandal.

Malott filed the lawsuit two years ago when the board refused to pay for his personal attorney fees based on an attorney general’s opinion and because he was also represented by lawyers hired by the state.

“The attorney general’s opinion stated clearly that I should not be reimbursed for my legal fees if I had done anything wrong, so this payment only demonstrates what I have said all along – that I have acted with integrity throughout my tenure at the ERB,” Malott said.

ERB Executive Director Jan Goodwin said in a statement, “Consistent with a ruling issued by U.S. District Court Judge Martha Vázquez earlier this year, the agency determined that a settlement was in the best interest of ERB members and beneficiaries. Continued litigation held the risk of escalating costs and an uncertain outcome.

“The settlement allows ERB to focus its attention on its mission of serving its members,” she said.

The ERB was represented by the Attorney General’s Office in the lawsuit.

More details on Malott’s conflicts of interest during his tenure at the pension fund, from the Albuquerque Journal:

Malott was named as a defendant in five separate civil lawsuits that claimed investments by the State Investment Council and the Educational Retirement Board were steered to investment firms by placement agents with close ties to then-Gov. Bill Richardson’s administration. The main placement agent, Marc Correra, shared in more than $22 million in fees for steering state investments from the SIC and the ERB to firms that paid him.

Correra’s father, Anthony Correra, was part of Richardson’s inner circle, and raised money for his campaigns for governor and president.

While serving on the ERB, Malott received a $340,000 loan from the elder Correra through a trust.

Malott resigned as chairman of the ERB following an interview with the Journal about the loan, which had not been disclosed to the ERB, the public or to Richardson, who had appointed Malott to the ERB.

The New Mexico Educational Retirement Board is the pension fund for 90,000 of the state’s teachers. It oversees $11 billion of assets.

Illinois Supreme Court consolidates lawsuits against pension reform

It could be a long time before the constitutionality of Illinois’ pension reform law is argued in the halls of the state’s Supreme Court. But now that day might come sooner than previously thought.

The Illinois Supreme Court used its authority today to improve the efficiency of the legal battles surrounding the state’s pension reform law by consolidating all four of the lawsuits into one case.

Four separate lawsuits had been already been filed against the reform law, which was passed in December and goes into effect July 1, 2014 but could be delayed by the lawsuits.

The State Journal Register fills us in on some of the background:

State lawmakers last year approved reforms designed to save the state $160 billion in pension payments over the next 30 years and wipe out the $100 billion pension debt.

The reforms change the 3 percent compounded annual raises in pension benefits, raise the retirement age and limit the salary on which a pension can be earned.

The reform bill also cut by one percentage point the amount of contributions workers must make toward their pensions. Pension reform proponents believe that “consideration” in exchange for lowering benefits makes the reforms constitutional.

Retired teachers, retired state workers and a coalition of public employee unions all filed lawsuits contending the change violates the pension protection clause of the state Constitution. That clause calls pension benefits an “enforceable contractual relationship” between government and workers and says the benefits cannot be “diminished or impaired.”

Attorney Don Craven, who filed one of the consolidated lawsuits on behalf of the Illinois State Employees Association Retirees, told the Journal Star that the consolidation could end up producing a speedier resolution, because cases move more quickly in Sangamon County than in Cook.

Major unions sue Illinois over pension overhaul

It was expected, and now it has arrived: a lawsuit has landed in the lap of a Sangamon County Circuit Court judge which seeks to overturn Illinois’ massive pension reform plan signed into law last month.

The lawsuit was filed by We Are One Illinois, a coalition of unions including the Illinois AFL-CIO, the American Federation of State, the Service Employees International Union, the Illinois Federation of Teachers, County and Municipal Employees, the Illinois Education Association and others.

The lawsuit, like the ones before it, centers on a provision in the Illinois Constitution that says pension benefits represent a “contractual relationship” and may not be “diminished or repaired”.

The Associated Press recaps the provisions of the reform law:

The plan reduces the annual cost-of-living increases for retirees and raises the retirement age for workers 45 and younger, giving some workers the option of freezing their pension and participating in a 401(k)-style contribution plan. It also puts some savings back into the pension funds and directs money from pension bond payments to the retirement systems after those bonds are paid off in 2019.

Lawmakers also included two components they say were intended to improve the plan’s odds of surviving a legal challenge: a 1 percent decrease in employee contributions and a funding guarantee, which allows the systems to sue the state if lawmakers don’t provide Illinois’ payments to the accounts.

The law was expected to take effect on June 1, 2014. But the lawsuit will likely delay implementation of the reforms, as the lawsuit asks the court to delay the law until the case is decided.