Saturday, October 8, 2016

A Word of Caution About Selecting the New NYCERS Executive Director

Just in case anyone is entertaining the thought of appointing Karen Mazza as the new executive director of NYCERS, including Mazza herself, let me refresh your memory about her illustrious career.

In 1990 I was appointed executive director at NYCERS after 17 years with the agency. In that position I had steady contact with the NYCERS Chair and other NYCERS trustees. At that time it was common for the Mayor to appoint the Finance Commissioner as the Chair of NYCERS.

In 1993 Mazza went to work for the Mayor's Pension Unit at the Finance Department. That unit supported the Commissioner with his/her duties as NYCERS Chair. In that position she worked for an attorney named Norm Rosner who was the Commissioner's alternate at the NYCERS Board. Rosner made it clear to me that Mazza was not an effective employee but gave no details. At the time I did not appreciate his insight into this woman. In hindsight, it is quite clear why he held her in such low esteem. She left Finance in 1994 and went to work at the Comptroller's Office.

Starting in 1991 Leo Vallee and I wrote the procedural descriptions for all newly passed pension legislation that impacted NYCERS. These write ups are still being used today. At that time NYCERS had an old time permanent staff lawyer who thought he was a brilliant legal writer. Unfortunately he was not. He was, however, honest.

In 1997, I hired Mazza as an administrative staff analyst. I was hoping we would get help with the analysis of the pension legislation along with other in-house legal issues. Because of the 1996 legislation giving NYCERS budgetary independence, I was legally prohibited from hiring lawyers in legal titles unless I had approval from the Law Department. The Law department was not about to give NYCERS that approval.

Unfortunately, Vallee and I had to continue writing the legislative descriptions because Mazza was also not able get the job done. This was a warning sign that Mazza was not an astute analytical attorney.

Falsifying Time Sheets

In 2000, Mazza gave birth to her second child. Also in 2000 we moved into the new office site in Brooklyn. She returned from maternity leave in late 2000. She returned to 8:00-3:45 work schedule. I worked a 9-5 schedule. Her new office had an open glass front as did all managers' offices and was twenty feet down the hall from my office. Whenever I passed her office I would be able to know whether she was in her office or she was on the phone. For the record she was on the phone almost every time I walked by.

In 2001, I began to notice that when I would arrive to work she was not in her office. I would eventually find her after 9:30 or later. She was one of the top three managers in the agency. Managers have a certain leeway with their schedules in that a manager can be make up time at the end of the day if he/she comes in late in the morning. She, however, was meticulous about dashing out the door at 3:45 hoping I would not see her.

One of my duties was to sign off on the time sheets of all of my direct reports which Mazza was. When I became aware of her absences at the beginning of the day, I started to closely cross check her time sheets with the days when I knew she was late and found that she was falsely recording her starting time as 8:00 when she very often was not arriving until 9:30 or later.

To double check what I had found, I examined the security system which records when all employees enter the working area of the office. Sure enough as another sign of her dishonesty, on the days that she was late she would make sure she did not swipe her security access card. She instead would tell the security guard on the front desk that she had forgotten her card and ask him to buzz her in through the security door. This meant that there was no trace in the security system of when she actually arrived.

I should have fired her at this point.

In retrospect, it was the worst mistake I made while running NYCERS. Foolishly I gave her a second chance. I spoke to her about what I had discovered. She tried to deny it. I told her it had to stop and that I would be closely monitoring her time sheets. From then on she knew I was watching her like a hawk. This was not a good situation.

In addition, in a regular weekly managers' meeting I made it very clear to the all managers that they had to swipe through security every day and if they forgot their card that they had to sign in with Security and mark their time. I got a few funny looks but Mazza knew I was talking about her.

Perjury and Fraud

Subsequently in early 2004 during the hiring process for a new HR director Mazza enabled Felita Baksh to falsify her writing sample which was crucial in my decision to appoint Baksh as the NYCERS HR director. This was in addition to the help that she gave Baksh with her resume.

As everyone at NYCERS has come to know, it is a law of nature that Baksh/Ramsami/DiLorenzo can not write a grammatically correct sentence never mind a two page essay. As a cruel twist of fate, the one HR staff member who unknowingly observed Mazza and Baksh rig the writing sample was eventually fired by Mazza and Baksh. This was after Conflict of Interest Board had fined for using this employee's credit card to buy furniture.

Later in 2004 Mazza conspired with the DOI investigator, Carol DeFreitas, who was investigating Baksh's appointment. DeFreitas was Martha Stark's "man" on staff at DOI. DeFreitas was literally her employee on assignment at DOI. I need not say anything more about Stark. Together Mazza and DeFreitas were able to supress any mention of Baksh's lying under oath or the false writing sample.

While one trustee forwarded the perjury charge to DOI, there was never any follow up.

Retaliation Against My Wife

After I was fired in March of 2005 Mazza was involved with creating trumped up charges against my wife which lead to her being demoted. Over the next ten years Mazza was a driving force behind placing my wife in position where she had no work assignments and ensuring that any attempt to give her work was blocked. In 2015 my wife had to resign because of health reasons. Over the ten years she had developed sever colitis and had a major heart attacked which almost killed her.

Just a Bad Lawyer

I previously mentioned that Mazza is a incompetent lawyer. In 2008 She was so unable to handle pension issues that she had NYCERS issue a $100K per year no-bid contract to a former law Department staffer to do her work. This went on for 4 or 5 years.

In 2008 Mazza lawyer began harassing the Tier 4 accident disability EMT retirees over the alleged gainful employment issue and forced then to enact legislation to override her incorrect interpretation of the disability statute. She also managed to deny a disabled EMT worker her rightful disability benefit.

When the Workers' Compensation Offset issue arose in 2012, she was in the fore front of crucifying Tier 3 retirees who were receiving disability benefits. Who can forget her words when she was cutting disabled pensioners' checks to $10 a month "we're trying to leave them with something in their pocket at the end of the month".

In 2006 NYCERS signed a lease for a disaster recovery site in Long Island City. Mazza handled the lease and all the the contracts for this fiasco. Ten years later the site still does not have a Certificate of Occupancy.

Closing Thought

D'Alessandro, the executive director, has been a nasty empty suit for eleven years at NYCERS. Now, in July, she appoints Mazza as Deputy Executive Director to fill the spot that opened up with the retirement of the person who held the position for ten years. Then two months later in September D'Alessandro announces her own retirement. What do you think is going on?

Friday, October 7, 2016

Finally Someone Noticed the Skim at TRS

This month the Citizens Budget Commission discovered a city funded subsidy for the teachers TDA fund at the NYC Teachers Retirement Fund (TRS), better late than never.

In 2013 I stumbled on the fact that TRS had a persistent negative cash flow.

Then in 2014 someone reminded me of something I sort of knew but never understood the full impact.

I can not understand how the city allows this massive benefit to exist. It puts the entire TRS retirement structure at risk. The teachers have a very respectable pension benefit. This subsidy to the TDA program is irresponsible in that it pulls assets, $1.2B in FY-2015, out of the pension fund every year. I can see how the teachers love this benefit but if all the other city workers find out about this, there will be hell to pay.

Monday, September 19, 2016

Questions about the Comptroller's Investment Expenses

On September 8, 2016 the NYCERS Board of Trustee held their regular board meeting for September. The second item on the agenda was three resolutions authorizing NYCERS to reimburse the City for “investment” expenses incurred by the Comptroller’s Bureau of Asset Management from July 1, 2016 to March 31, 2016. The amount for the first quarter of FY-2016 was $552,461. We never got hear what the amounts were for the two quarters from October 1, 2015 to March 31, 2016 because the resolutions were tabled for the next meeting in October. I have written about these reimbursements in the past.

The reason they were tabled was because the Chair of the Board, John Adler, asked that they be tabled.


Because as the Chair stated the documentation supporting the expenses provided by the Comptroller’s Office was “difficult to decipher”. He stated he had questions and he wanted all three resolutions held up until he was satisfied that the expense were properly documented and appropriate for reimbursement from the corpus of the fund.

The Comptroller’s representative asked whether the Chair had communicated his issues to the Comptroller’s Office.

The Chair said that he had not yet done so. He further said that the documentation was very unclear, hard to decipher and was not in any standard format. This made it a laborious process to analyze. He also stated that this analysis had not been done before.

John Adler is a low key person who became the Chair of NYCERS in March, 2015. This is the first time since he became settled into his current position that he has had to deal with this budgetary flimflam. It, unfortunately, also occurs at the other four city pension systems and runs about $5M per year.

The Comptroller’s representative agreed that this type of analysis on the expenses had never been done before and asked for specifics on what the reporting format should be.

The Chair responded that the City had uniform directives about documenting expenses. He also stated that it appeared to him that the Comptroller, as the City auditor, was not abiding by those actual directives. Specifically he said that the Comptroller was sometimes using city expense rules and sometimes federal rules.

The Comptroller’s rep said that she did not think that different rules were being use and that she would be surprised if they were.

“I think you will be surprised” the Chair said in response.

To the casual observer this might not seem to be a big deal. Trust me, this is a big deal.

Friday, September 16, 2016

A Little Good News!

On Wednesday, September 14, the NYCERS executive director, Diane D'Alessandro, announced that she was retiring at the end of December.

Hopefully the exit of this vicious incompetent boss should provide most NYCERS employees with some relief from their daily stress at work. Of course it will create serious concerns for all the equally incompetent flunkies that she has hired over the last 11 years as well as some other specific employees that have done her dirty work during that time. I am referring to Karen Mazza, Felita Baksh/Ramsami/DiLorenzo, Kin Mak, and Liz Reyes among others.

There was a DOI investigation started in response to the Ellen Carton hiring. I suspect D'Alessandro wants to get out of Dodge before the sheriff arrives.

I sincerely hope that the trustees are able to clean house after she is gone. This agency has a totally adequate operating budget as opposed to other city agencies. It should be an example of almost perfect service to members and retirees as opposed to the arrogant dismissive operation that it is.

Assuming D'Alessandro has no pre-2001 NYS/NYC service, her pension will be about $50K/yr. based on a $217K/yr salary and 14 years of service. This is not a smart financial move. Six more years of service and 12% increase in salary would have increased her pension to $97K/yr.

Friday, April 29, 2016

NYCERS dumps Hedge Funds

It appears that the NYCERS trustees have finally woken up. On April 14, 2016 the trustees voted to dump their hedge fund investments. What took them so long? Still there was one trustee who voted to stay with hedge funds, Teamster's Local 237. I find this position by a labor union very troubling

Now if they can only dump their private equity and real estate investments. But they can't do that, even if they want to. The idiots signed "no cut" contracts with no termination dates.

What is worse, is that they don't know what the contracts say. The Comptroller won't even let them see the contracts, contracts he signed. It gets even worse. The trustees authorize the Comptroller every year in June to continue this craziness for another 12 months.

I have written for a long time about this insanity. Don't let them tell you that they didn't know until now.

In a desperation move the investment community is attacking this action as being politically motivated. I'm sure there is a healthy dose of politics involved but the investment managers are terrified that if this movement gets going, they will all be taking orders behind the counter at McDonald's. That is if they get there first.

Saturday, February 6, 2016

NY Times: NYC Pension Funds and "Operational Failure"

On Tuesday, January 26, 2016, the NY Times reported the public release of a study analyzing the investment capabilities of the NYC Comptroller's Office. The NY Times article focused on the expression "danger of operational failure" to summarize the opinion of the report. The city paid Funston Advisory Services $1.4M for the 406 page report.

According to the following exert below from the report, the Comptroller's Office is currently not up to the job and needs lots of money to get the office into shape.

Our overall conclusion is that additional resources are required or the current investment strategy presents a very high level of operational risk. This is a problem that has been growing over the course of multiple administrations. It requires a long-term solution, long-term leadership, the support of the Systems, and long-term resourcing, but it also demands immediate action.

Continuous improvement (doing what BAM already does, but better) is necessary but not sufficient. Discontinuous improvement (doing new things in new ways) is also required. Unfortunately, given its existing resources and demands, BAM’s management currently has little or no capacity to implement many of the recommendations of this report.

To me it appears that the study was designed to help the Comptroller hold onto his annual designation as investment manager and his control over the investment process at the five city pension funds. I also suspect that the Mayor's Office is pushing to outsource the management functions of the pension fund so as to remove the heavy political influence that emanates from the Comptroller's Office.

As a example of this political influence, one of the people listed by Funston Advisory as a member of their team is a man named Jon Lukomnik. Jon worked for The NYC Comptroller Alan Hevesi from 1994 to 1998 as his representative on the NYCERS Board of Trustees. In FY-1997 Jon lead the move to allow Hevesi complete control of all of the NYCERS investment contracts and the payment of the fees outlined in those contracts. This is exactly one of the primary sources of the current chaos in the Comptroller's Office. As NYCERS executive director I specifically opposed this move in 1997 but for some reason the mayor's Law Department went along with this take over.

As long ago as 2011, I pointed out the improper activities by the Comptroller's Officewhen it came to investment contracts and fees for the pension funds. As recently as November of 2015, I again pointed out the mess at the Comptroller's Office. This report, however, documents in details how bad the internal operational problems are at the Office of the Comptroller.

The real reason the Comptroller's Office has become overwhelmed with the investment process is that trustees of the five city pension funds have made terrible investment decisions over the last 15 years.

The solution to the trouble at the Comptroller's Office is not more staff, higher salaries, and more spending. The real change needed is much more simple than what the report recommends but just as radical.

Instead of spending more money and hiring more people, all five funds should radically simplify their investment strategies. Invest only in 1) direct US stock index funds (S&P 500 or Russell 3000) and 2) Treasury, high rated corporate, and agency bonds.

They should reduce the number of investment managers and have a target of ten managers for each fund. They should also set a target for investment fees of 10 basis per year.

When the dust settles, the Comptroller's Office will be able to do its job with mere mortals. The five pension funds will earn more returns on their assets, pay far less in fees and the city will save on pension costs.

Of course, the Comptroller would be totally irrelevant politically and lots of of people on Wall Street would be out of a job.

While the trustees are reforming things, they should consider the following suggestion. Since the pension funds are already paying the Comptroller to do such a tenuous job managing their investment activities, they should put out a RFP for the work to see if they could get the job done better at lower cost. That is what the Comptroller did with his pension custodial and cash management work.

And another thought. Don't you think that when a new Comptroller comes into office, that he/she will want to replace all those highly paid provisionals in the Bureau of Asset Management with his/her own "experts".

The following is another quote from the report that is indicative of the quality of the report:

The reduction in the number of investment committee meetings will go a long way toward alleviating BAM’s workload. This reduction will free up executive time to address much needed strategic and operational improvements, but BAM still requires additional resources for both staffing and modernized systems. In combination with our recommendations, BAM can make significant progress toward becoming a world-class investment operation.

If the proposed reduction of investment committee meetings had failed to be accepted, we believe BAM and the Systems would have had a basic choice to consider: 1) increase the level of BAM resources to fully implement the recommendations (people, processes and systems) contained in this report; or 2) reduce the complexity of the asset allocation to a level which can be supported by the current level of resourcing.

This is utter garbage. The jamming of the monthly investment board meetings for the five city pension funds into one meeting accomplishes only one thing. That is the staff at the Comptroller's Office only has to put on its dog and pony show once a month instead of five times. The cock and bull story about the five board meetings per month being such a burden is just a smoke screen for the total chaos that is happening in the Comptroller's Office.

It is interesting that up to 70% of any investment meeting is held in hidden executive session. How does the Comptroller's staff handle access to info for specific pension fund that it deems to be covered by executive session when five different groups of trustees are sitting in the meeting? I hope everyone realizes that the five funds do make different investment decisions. TRS has actually been able to avoid investing in hedge funds.

Of course, we all know that there is very little that honestly qualifies for executive session.

If there wasn't so much garbage in the investment portfolios, it would take the Comptroller's staff one day to prepare for a regular investment board meeting. Of course you might start to wonder what they were doing for the rest of the month.

The Board of Trustees for each of the five systems are responsible for the prudent investment of the each of the funds, not the Comptroller. His/her annual delegation is at the discretion of the trustees of each of the five funds.

Friday, January 29, 2016

Late Deposit Date for NYCERS January Pension Checks

NYCERS is making the EFT deposit for the retirees' January 31, 2016 pension checks on February 1, 2016. That is one day late. This is totally incorrect and will cause many retirees serious cash flow problems. The January 31 check represents payment for the month of January.

Guess what? When I got to the bank on January 30, the pension check had been deposited. NYCERS needs to update their chart.

The pension payments are due as of the last day of the month. If the deposit can not be made on that day due to banks being closed, the deposit has always been made properly on the day before, not the day after. On any given month the retirees have to wait until the end of the month to get the payments due for the days starting with the first day of that month. The check does not represent the following month's benefit.

NYCERS has no authority to delay the payment of pension benefits. NYCERS is in effect getting a one day loan of $250M for free.

The month of April is even worse. The EFT deposit date is May 2. That is two days late.

Someone might call this theft.