Friday, February 13, 2015

Sheldon Silver, Martha Stark and Glenwood Management

2011 DOI report on Stark

On January 21, 2015 Sheldon Silver was arrested for fraud and conspiracy. In a description of the charges the name of the Glenwood Management Company surfaces in connection with a kickback scheme that Silver dreamed up to funnel fees from a legal firm to him.

NY Times

In one scheme described in court papers, he asked a pair of real estate developers to hire a small law firm, Goldberg & Iryami, which seeks reductions in New York City property taxes on behalf of its clients.

The firm was started by Jay Arthur Goldberg, who decades ago worked as a lawyer for the Assembly, according to state payroll records. Prosecutors said he was Mr. Silver’s counsel.

Mr. Silver received a slice of the legal fees paid to the firm, even though he did no work for the developers; prosecutors said he was paid about $700,000. He did not report the income on his annual financial disclosure forms submitted to the state.

One of the developers was Glenwood Management, according to people familiar with the matter. Glenwood develops luxury apartment buildings in Manhattan, has been an enormous contributor to state politicians and has a significant interest in matters before the Legislature, such as measures dealing with real estate taxation. While receiving fees from the real-estate law firm, Mr. Silver took actions that benefited the developers, prosecutors said.

Strangely enough, the Glenwood Management firm also surfaces on pages 10 to 33 of a June, 2011 NYC-DOI investigative report on allegations about Martha Stark that were pending at the time she was forced to resign in April, 2009.

Beginning in March, 2005 Stark was involved in lowering the tax assesments for Glenwood. Subsequently in January, 2007 she asked Glenwood for a apartment for her domestic partner (DOI never states which one) along with a break in the rent for the apartment. Read in light of Silver's recent arrest connected to Glenwood, the report has a much more powerful impact. Below is a quote from this section of the report.

The juxtaposition of Stark's request for assistance with an apartment for her domestic partner in a Glenwood owned building and the notice of reduction in assessed value of a Glenwood building for that tax year, and the erroneous further reduction that occurred in the following tax year raises, at a minimum, an appearance issue, and gives rise to the question of whether the reductions were some form of assistance related to the assistance given in the provision of an apartment at a modest reduction for the Finance Commissioner's domestic partner.

Attempts to answer that question were made difficult by Stark's repeated refusal to be interviewed by DOl in connection with this investigation. In addition, the explanations for the assessments were hindered by DOF's lack of oversight and recordkeeping related to the assessment process, as the investigation revealed.

Even after the arrest in 2002 of 18 tax assessors, the work of the DOI/DOF Joint Task Force and the representations by DOF that changes were made and that others would be made in the Joint Task Force Preliminary and Final Reports, there remains a lack of internal controls over assessments.

The costs to the City from this lack of oversight is unknown since no reviews were undertaken to determine if properties were undervalued, and no random audits performed and no regular reports even distributed of significant changes in assessed valuation during the period DOl examined. Finance Commissioner David Frankel reports that he has undertaken measures for reviews/audits of assessments, including assigning/hiring personnel to conduct such audits.

The spring of 2005 was also the time of the $1.74B purchase and alleged tax assessment issues in connection with with Met-Life building, NYCERS, TRS, and the Department of Finance.

It is interesting that in October, 2005 Stark, as the NYCERS Chairperson, was instrumental in hiring of Diane D'Alessandro as executive director of NYCERS. At the time D'Alessandro was a special assitant to Sheldon Silver. Prior to that D'Alessandro worked for DC-37 during the Charlie Hughes and Al Diop years.

Wednesday, January 21, 2015

Paper Tiger - the N.Y.S. Department of Financial Services - Pension Fund Audits

In July of 2013 the N.Y.S. Department of Financial Services (DFS) with a lot of fanfare announced the start of an audit of the seven state & city pension funds.

It's now January 20, 2015 and DFS has not yet produced any of the pension audits. Just a reminder, DFS has not produced an audit of NYCERS since 2002 in spite of the agency's statutory obligation to produce an audit every five years.

Of course, DFS collected $611,536 from NYCERS during FY-2014 for audit work that DFS supposedly did during that year.

When I saw the charges for 2014, I thought I'd do a little research. Here are the DFS audit charges to NYCERS since 2004:

  • 2004: $ 55,007
  • 2005: $ 64,612
  • 2006: $361,681
  • 2009: $179,542
  • 2010: $ 32,009
  • 2011: $ 29,713
  • 2014: $611,536

This is an agency adrift. They are lost.

Friday, December 5, 2014

TRS - Permanent Handicap - TDA Transfer

Last year I wrote about a persistent negative cash flow at the NYC Teachers Retirement System (TRS).

Just recently someone pointed out to me the impact of something I vaguely knew about but not really. Every year TRS pulls money out of the pension fund and transfers it to the TDA plan that it runs separately from the pension plan. The TDA plan is a defined contribution plan, a 403(b) plan in IRS speak. Information about this transfer is buried in the TRS annual CAFR. The city, however, has never identified the transfer in its annual CAFR. That is until FY-2014.

This is why TRS has had a negative cash flow for the last 15 years. In the last eight years (2007-2014) TRS has paid $33.3B in benefits but $6.8B went to the TDA plan and not pension benefits. The employers' contributions for the 2007-2014 period were only $19.2B. This is a big problem. It is never discussed publicly. I have no idea how Bob North, the TRS actuary, values this liability for the TRS pension fund. This is a huge leak in the funding pipeline for the TRS pension plan.

If you look at the table below it appears that North is reporting a funding level for TRS based only on the liability based on the pension benefits paid and ignores the TDA transfer.

Funding Status for TRS and NYCERS for FY-2013

System Actuarial Assets Actuarial Liabilities Funding Level MembersPensionersPension Benefits Paid TDA Transfer
NYCERS $42.4B $65.3B 65.0%212,347137,987$3.9B $0.0B
TRS $33.6B $57.7B 58.2% 132,01776,539$3.6B $1.1B

TRS Benefit Payout Since 2007

Fiscal YearEmployer ContributiondsAll Benefits PaidPensions PaidTDA SkimOther Benefits PaidPension Paid % TDA Skim %Other Benefits %
2005$1.23B $3.13B ******
2006$1.32B $3.34B ******
2007$1.60B $3.58B$2.89B$0.55B$0.14B80.7%15.3%4.0%
2008$1.92B $3.78B$3.02B$0.65B$0.11B79.9%17.1%3.0%
2009$2.22B $3.78B$2.92B$0.77B$0.10B77.1%20.3%2.6%
2010$2.48B $4.12B$3.20B$0.82B$0.10B77.8%19.8%2.4%
2011$2.47B $4.33B$3.38B$0.85B$0.10B78.1%19.7%2.2%
2012$2.67B $4.49B$3.44B$0.95B$0.10B76.6%21.1%2.3%
2013$2.86B $4.67B$3.54B$1.05B$0.08B75.8%22.5%1.7%
2014$3.00B $4.58B$3.82B$1.15Bnr83.4%25.1%*
2007-2014$19.22B $33.33B$26.21B$6.78B$0.73B***

Monday, November 17, 2014

Investment Fees for NYC Pension Funds since 2000 - Good Work If You Can Get It

The Comptroller just came out with the city's financial statement on Halloween. One of the interesting items in the report is the amount paid in investment fees for the five city pension funds. FY-2015 continued the insane upward trend as you can see from the list below. The grand total for the last 15 years is $4.0B. Yes, that is billion. All for 3.6% rate of return, maybe.

  1. 2014 - $530.2M
  2. 2013 - $472.5M
  3. 2012 - $370.3M
  4. 2011 - $395.7M
  5. 2010 - $426.8M
  6. 2009 - $339.3M
  7. 2008 - $310.2M
  8. 2007 - $262.0M
  9. 2006 - $192.7M
  10. 2005 - $158.2M
  11. 2004 - $131.6M
  12. 2003 - $ 96.7M
  13. 2002 - $101.9M
  14. 2001 - $100.0M
  15. 2000 - $100.0M

Friday, October 3, 2014

NYC Law Department

I have previously written about the inherent conflict of interest in the NYC Law Department. You would think that the lawyers at the Law Department represent the citizens of New York City and their best interests. You would also think that full disclosure is in the best interest of the citizens on New York City.

On September 21, 2014 NY Times published an article about a scandal at the NYC Department of Corrections concerning a falsification of official records in 2011. In 2012, when the fraud was discovered by DOC investigators, the Corrections Commissioner chose to radically alter the investigatos' report by erasing all damaging information relating to the roles of the two senior DOC managers involved. She had previously promoted those managers.

The following is a quote from that article:

The audit’s authors said that the testimony of both Mr. Clemons and Mr. Gumusdere pointed to a “complete abdication” of their obligations as managers, recommending that both be demoted “based on their admitted lack of attention to critical duties and responsibilities of jail management.”

Then Ms. Schriro intervened. After consulting with the department’s legal counsel, and being told she had the authority to alter the report, she ordered the reference to demotion removed, Ms. Schriro said. She also directed the investigative division to remove large portions of the most critical material involving Mr. Clemons and Mr. Gumusdere, including the statement that “it defies logic to think that they could have concluded that the number of fights RNDC reported during these months was accurate.”


In February 2013, as part of their civil rights investigation, the federal authorities made a detailed request to the city for documents related to the use of force by guards on teenage inmates and violence between the adolescents. The request included “all” documents related to audits and reviews to assess the accuracy and integrity of reporting on such incidents, including, but not limited to, “working papers and any other documents reflecting findings or recommendations,” according to one person who was told of the request.

A city Law Department official said on Friday that the first version of the report was not produced in response to the original federal requests because it was treated as a draft and seen as privileged. Last week, the United States attorney’s office specifically requested it from the city, and the current corporation counsel, Zachary W. Carter, decided that it should be turned over — and it was, the official said.

It is clear that the Law Department under the Bloomberg administration withheld significant evidence from federal authorities who were investigating serious allegations about activities at the NYC Department of Corrections during the Bloomberg administration. The reason given, that the original audit with specific supporting details was a draft and privileged, is what you might expect from a lawyer in private practice. The citizens of New York City, however, are entitled to have their attorneys represent their best interests and not the Commissioner of Corrections or city hall.

The current Corporation Counsel, a former US Attorney in the Eastern District, has now turned over the "privileged" report to the federal authorities.

As a general principal the public has a right to see everything that our government does as outlined in our freedom of information laws. The attorney at the Department of Corrections who signed off on the altered report and the lawyers at the Law Department who labeled the report as privileged should be fired for incorrect legal decisions. And we all know that what they did should be considered illegal.

Friday, September 12, 2014

Recycled Garbage

In June of this year the executive director of NYCERS, Diane D’Alessandro, appointed Diane Bratcher as deputy director of communications for the agency. The position had become vacant when the former director had left to work in the mayor’s office. His annual salary was $150K. I strongly suspect there was no posting for this position.

At the time of this appointment, Bratcher had been working for eleven months as an associate staff analyst at HRA. The hiring salary for new ASA’s is $59,536.

As background, Bratcher graduated from college in 1974. For the next eight years she seems to have been unemployed. In 1982 Bratcher started working for the Interfaith Center for Corporate Responsibility. She worked there until May, 2002. A month later she was hired by the NYC Finance Commissioner, Martha Stack, as an assistant with a salary of $95K.

Three months later in September, Stark was appointed by Mayor Bloomberg as as the chair of the NYCERS Board of Trustees. At that point Stark made Bratcher the director of the pension unit at Finance, replacing another woman who was a veteran city attorney who had worked for many years at both the Finance pension unit and the NYC Law Department.

For the next seven years Bratcher functioned as a submissive assistant to Stark. I make this comment based on my observations of their interactions at NYCERS board meetings from 2002 to 2005.

It has been established by the NYC Department of Investigation that Stark was slicing through numerous female employees during her seven years as the Finance Commissioner among other transgressions. According to several Finance employees Stark’s escapades were common knowledge within the agency. It is reasonable to conclude that Bratcher was also aware of this sexual activity by her boss, Stark.

In March 2005, Stark as chair of the NYCERS Board of Trustees fired me as the NYCERS executive director because I was involved with a woman on the NYCERS staff. We have since been married. My wife, fortunately or unfortunately, still works at NYCERS.

In October 2005, Stark and the other trustees appointed D’Alessandro as the new NYCERS executive director. Bratcher was actively involved with this appointment.

In April 2009, Bloomberg accepted Stark’s resignation and ordered an investigation into her activity at Finance including her predatory actions with respect to female employees.

All three women, D’Alessandro, Stark, and Bratcher, are long time politically active gay women.

In January 2011, Bratcher left Finance. Her salary at that time was $125,847. Assuming she had joined NYCERS, she was eligible for an annual pension of approximately $18,200 but not health insurance.

In May 2012, Bratcher started working at the UN Principles for Responsible Investment. She lasted there until April 2013. She started working at HRA in July 2013. I strongly suspect that she rejoined NYCERS because of opportunity to significantly increase her pension and gain health insurance coverage in retirement.

Assuming that D’Alessandro gave Bratcher the salary of the former deputy director of $150,000, a significant increase over the ASA salary, Bratcher will be able to increase her future pension by at least an additional $2,100 for every year she works at NYCERS. She will also be eligible for retirement health insurance by the end of this year.

In 2006 I observed Bratcher being deposed during a libel suit I filed against Stark and the NYCERS Board of Trustees. It is common practice for people to lie when testifying during a deposition. They conclude that there is no evidence to contradict what they say. Usually they are correct. But it is truly punishing when evidence is produced during the testimony that proves that the person being deposed has just lied.

The following is a portion of Bratcher’s December 13, 2006 deposition:

Q. Your testimony is Murphy tells the trustees that the DOI report is inaccurate. He had the relationship with Browne, but the DOI report is inaccurate, right?

A. Right.

Q. He wants an opportunity to correct the DOI report. You're saying he says nonetheless, he is going to retire?

A. Yes.

Q. Unconditionally?

A. Unconditionally.

Q. He is just going to retire?

A. Yes.

MS. CARROLL: Mark this document as Bratcher Exhibit 5. It is numbered N 0040. (Bratcher Exhibit 5, N 0040, marked for identification, as of this date.)

Q. After Murphy made his statement to the board, he left the room and then there was executive session again?

A. Yes.

Q. It is a fact, is it not, that because Murphy had not agreed to retire, that the board voted that Murphy had to go; isn't that what happened?

A. No .

Q. Would you look at N 00040. Do you see the second paragraph?

A. Yes.

Q. This is from you to Llembellis. Who is Llembellis?

A. Llembellis at that time was counsel to The Bronx borough president and his representative to the NYCERS board of trustees.

Q. You prepared this E-mail and sent it to Llembellis telling her what occurred at the NYCERS meeting?

A. Yes.

Q. The second sentence of the second paragraph, everybody else voted that John had to go and empowered Martha to negotiate that with him. You wrote that?

A. Yes.

Q. You wrote it on March 11, 2005, the day after the meeting?

A. Yes.

Q. It was accurate when you wrote it, wasn't it?

A. Not accurate.

Q. Are you in the habit of writing inaccurate memos, Ms. Bratcher?

MR. MARKS: Objection to the form.

A. I am not in the habit of –

Q. No, you're not. In fact, you're a very capable assistant, aren't you?

A. I think so.

Q. When you do things, they are very carefully crafted, like your analytical summary, aren't they?

MR. MARKS: Objection to the form.

A. Sometimes, usually.

Q. One could think this document, Stark 2, was done by a lawyer it is so direct and on the money as to the issues, right?

MR. MARKS: Are you trying to pay her a nice compliment or ask her a question?

Q. This statement when you wrote it was true and accurate because you don't write inaccurate and untrue statements, do you, Ms. Bratcher?

A. It was inaccurate. No vote was taken.

Q. Is there any reason why you would mis-inform Ms. Llembellis as to what occurred at the trustee meeting?

MR. MARKS: Objection to the form.

A. I didn't mis-inform her.

Q. I am asking you, is there any reason why you would mis-inform Ms. Llembellis and tell her that everybody else voted that John had to go and empowered Martha to negotiate that with him; is there any reason why?

A. No reason.

Q. The Earl who abstains on the decision, who is that?

A. Earl Brown, E A R L.

Q. By abstaining, that means he didn't vote?

A. What happened -- you want me to answer what happened?

Q. It says here, Earl ended up abstaining on the decision. My question to you is, Earl was a trustee at the meeting?

A. Yes.

Q. That is what you're intending to advise Llembellis about?

A. Right.


Tuesday, May 13, 2014

Emerging Manger Circus and the NYC Pension Funds

Three weeks ago Scott Stringer issued a press release saying that he was going to recommend that the NYC pensions funds dump another $1B into the emerging managers circus.

For the record in FY-2013 NYCERS had $818.25M invested in US equities run by emerging managers. NYCERS paid them $4.41M in FY-2013. That is 50 basis points (50 BP's).

During the same year NYCERS had $4.39B invested in a Russell 3000 index fund run by Blackrock. NYCERS paid them $161,565 in FY-2013. That is .4 basis points (.4 BP's).

The emerging managers had the following returns:

  1. one year: 22.63%
  2. three years: 18.34%
  3. five years : 6.84%

Blackrock had the following returns:

  1. one year: 21.37%
  2. three years: 18.58%
  3. five years : 7.24%

I don't think I have to say more except that the trustees in their infinite wisdom terminated Blackrock in FY-2014. You can't make this stuff up.