David Francis, The Examiner
2007-05-30 13:49:00.0
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WASHINGTON -

Despite being entirely funded by taxpayers and Metro riders, the pension fund for Washington Metropolitan Area Transit Authority workers is administered without government oversight and will not disclose its assets, or even the names of all of its trustees.

Unlike private-sector or other public-sector pensions, which have strict accounting and public reporting requirements, the Metro pension fund operates in a regulatory vacuum. According to the collective bargaining agreement between Metro and Amalgamated Transit Union Local 689, the trustees of the fund — six people named by Metro and the union — have complete control over how the retirement money is managed.

Many public pension funds voluntarily follow standards set by the Government Accounting Standards Board, which obligates plans to report deficits or surpluses.

The Metro fund has adopted no such reporting requirements and is not required by law to publicly reveal details about the its financial performance or solvency. The last public disclosure of the fund’s assets came in 1999, when news reports put its value at $2.5 billion.

The Metro pension fund also is not subject to public audit. Metro serves Maryland, Virginia and the District, and it does not have to comply with the accounting requirements of any of those jurisdictions.

Naming names

Three members of its board of trustees are appointed by Metro’s general manager, and three are appointed by the union. Jack Requa, Greg Garback and James Pankey are the three Metro members. Metro spokeswoman Lisa Farbstein said Jackie Lynn Jeter, president of Amalgamated Transit Union Local 689, is one of the three union members, but neither Metro nor the union would identify the other two.

Requa, who until recently was in charge of bus service, remains with the authority in an executive role. Garback works in Metro’s finance office, while Pankey works in the benefits department. Jeter has been president of the union for less than a year, with reports identifying her as a union spokeswoman as recently as December 2006.

Though Metro has responded to requests under its open-records policy in the past, it refused to turn over information on the fund, instead referring The Examiner’s request for records to the trustees of the Transit Employees Retirement Plan. Trustee attorney Frederick Marx refused to answer any questions about the fund until the trustees discuss the request.

The lack of transparency and accountability is particularly worrisome because Metro’s pension, like other publicly funded retirement systems, has no guarantor to take over payments if the plan falters. Under the federal Employee Retirement Income Security Act — known as ERISA — the federal government guarantees the pensions of private companies. If obligations to the 7,000 Metro employees covered by the plan cannot be met, WMATA must borrow money, raise fees or rely on increased taxpayer contributions to make up the shortfall.

Other large public pension systems minimize their risks through rigorous oversight by government, unions and members of the public. Pension contributions made on behalf of members of the Metropolitan Transit Authority in New York are put into the New York City Employees’ Retirement System, a pension fund containing the retirement savings of many New York City employees. This plan is governed by an 11-member Board of Trustees, which has representatives from all five boroughs, a representative appointed by the New York City mayor, a public advocate, three union representatives and the city comptroller.

The New York City plan also is audited annually by the New York City comptroller to ensure it is being properly managed — an audit that is available online.

An overfunded plan

U.S. Department of Labor spokewoman Gloria Dell said it is up to states to determine public pension fund accounting requirements.

“Fifty states, 50 oversights,” she said. “Each has its own requirements. We have no idea what they do or how they operate. They don’t report to us.”

In a letter posted online, Jeter told union members their retirement plan has been overfunded since 1995 due to the “sound investment strategy and oversight of the Trustees.”

Maybe so, but Metro has had to increase its payments to the plan in recent months. According to a Metro financial report, the system exceeded its February budget by $900,000. The report attributes the shortfall to “higher than expected contributions” to the retirement plan and “higher than budgeted health care costs for the Local 689 Health & Welfare Plan.”

The history of the fund provides other reasons for concern. Between 1992 and 1999, a portion of the fund’s money was in the hands of an investment manager who is now serving time in prison for cheating his clients, including Metro.

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In 1999, New York investment manager Alan Bond was indicted for giving kickbacks to James Thomas, then Metro union president, according to court records. John Baughman and Leonard Joy, two attorneys who served on Bond’s defense team, confirmed the details of the charges against Bond.

During the 1990s, the Dartmouth- and Harvard-educated Bond was highly regarded in the money-management world. He was hired by Metro in 1992 to oversee a portion of its pension fund, with the Washington authority becoming his largest client. He also managed money for the National Basketball Association, the Old Dominion Disability and Retirement Allowance Plan, the Birmingham, Ala., Amalgamated Transit Authority Local 725 and Amalgamated Transit Union Local 1220 in Richmond.

$6.3 million vs. $56 million

Then, in 1999, the Securities and Exchange Commission accused Bond of taking nearly $7 million in kickbacks from brokerage firms. He was also accused of providing Thomas with at least $15,000 in gifts.

While out on bail on these charges, Bond cherry-picked well-performing stocks for his own portfolio while placing his clients’ money in poor performers. He pocketed $6.3 million, while his clients lost $56 million, according to court documents.

Bond was also connected with Nathan Chapman, who in 2004 was convicted of defrauding the Maryland state employee pension system. Bond testified that Chapman pressured him to use pension money to purchase stocks at an inflated price.

dfrancis@dcexaminer.com