The Email Superman

For all you IT pros, this should be a funny story.

Quoted below is an excerpt from an affidavit submitted by Kin Mak on June 19, 2007.

Mazza was under investigation by DOI (DeFreitas) for improperly influencing the hiring of Baksh as NYCERS HR director with respect to both Baksh’s resume and possibly Baksh’s second writing sample. Mazza had told DeFreitas that she had previously deleted all her relevant emails to Baksh. DeFreitas had asked Mak to search for Mazza’s deleted emails. For some reason DeFreitas allowed Mazza to participate in the alleged search for the deleted emails.

Here is the quote:

3. My search for the e-mails requested by Ms. DeFreitas was structured as follows.
First, the time period for the search was January 2004 through July 27, 2004, the date of the DeFreitas request.
Second, I searched for two types of e-mails:
(1) e-mails in Ms. Mazza’s e-mail box in which Ms Mazza was either the sender or the recipient and “resume” was the subject of the e-mail: and
(2) e-mails in Ms. Mazza’s e-mail box in which Felita Baksh, was either the sender or recipient at the e-mail address of bakshf@fdny.nyc.gov., and which either had “resume” in the subject field or the substance of the email concerned Ms. Baksh’s resume.
I conducted the search for the above e-mails by:
a) searching Ms. Mazza’s then-current e-mail box, i.e., the e-mail box as it existed on July 27, 2004; and
b) searching the weekly backup tapes starting from July 27, 2004, and going back to January 2004.

4. As result of the above search, I was able to recover one e-mail, dated January 28, 2004, in which the original sender was Felita Baksh at bakshf@fdny.nyc.gov, the subject was “Resume” and which had been sent by Ms. Baksh to Niki Browne NYCERS, who forwarded it to Ms. Mazza. On July 27, 2004, I forwarded the recovered e-mail to Ms. DeFreitas. A copy of an e-mail from me to Ms. DeFreitas, dated July 27, 2004, containing the recovered e-mail, is annexed hereto as Exhibit “B”.

This alleged search occurred sometime between 7:17 AM and 10:22 AM on July 27, 2004. As per instructions from DeFreitas and Mak’s comment in his 7:17 AM email, Mak spoke to Ms. Mazza before going ahead with the email search. For all of you who know Mazza’s morning arrival record at NYCERS, you will conclude that Mak did not start his search promptly at 7:17 AM. By 10:22 AM on the 27th, Mak emailed DeFreitas the results of his search, the one email mentioned above.

To anyone who is not familiar with the logistics of Microsoft’s Outlook, Mak’s description of this alleged search appears to be unremarkable. It is, however, the equivalent of someone describing a one mile run that took only 5 seconds. This was a patently false affidavit. The Law Department was made aware of the obvious lies in the affidavit but chose to bury the inconvenient truth. It’s not cheating, if you don’t get caught.

While it was very easy to search the current email box, the alleged searching of the 27 backup tapes would have been an enormously time consuming project. The tapes are not directly accessible and have to be downloaded to perform the search that Mak described. It usually takes over an hour for NYCERS to perform the daily backup of its Outlook system. The backup process is relatively simple compared to the restore process. I will spare you the complexities of restoring Outlook especially when there is already an active production Outlook system running. It is almost metaphysically certain that Mak did not search any of the backup tapes. Of course, there is no paper documentation of this search on the morning of July 27, 2004.

The affidavit was notarized by, guess who, Karen Mazza.

Subsequent to this affidavit Mak had to clarify that the famous one email was actually found in Niki Browne’s current email box and not in any of Mazza’s email boxes. At least that was what Mak said. Why was he looking Ms. Browne's email file?

Shake Hands with the Devil

In early 2000 at the height of the dot-com bubble, the former mayor agreed to major improvements in the pension benefits for city workers. At the same time, the trustees of the five city pension funds agreed to a “market restart” of the assets of the city’s five pension funds as recommended by the NYCERS & TRS actuary. This allowed the city to drastically cut its pension contributions in 2000.

But almost immediately, the devil came knocking on the door. After steadily advancing for ten years, the market perversely began to collapse and did not recover until 2003. See note below.

In the summer of 2002, it was clear to informed experts that the five city pension funds were headed in the wrong direction and that they needed to make serious changes to the systems. They, first, had to put in place a lower benefit structure for new employees. Second, they had to significantly increase employer contributions. Third, they had to put in place an investment strategy that would minimize risk, steadily grow the assets of the funds and produce an adequate and reliable income stream. For various reasons they did none of these things.

Then in 2007, the mortgage crisis hit and the devil was back with a vengeance. When the markets closed on June 30, 2009, the city pension funds had approximately $82B in assets, $19B less than they had 10 years ago. The rate of inflation over the last ten years makes this loss even worse than it first appears.

Over the same ten years, the pension funds have fallen short of their expected rate of return by $53B. The actuary’s 8% target has turned out to be beyond the reach of the trustees. Perversely, it also caused the trustees to adopt a very aggressive investment strategy.

Since the City Charter revision in 1989, the mayor has become the dominant political figure in the city. As such, his representatives on the pension boards wield tremendous power. It is unfortunate that his former choice for the NYCERS and TRS chairperson brought no expertise to this position. In FY-2009, the trustees of the five pension funds blindly spent $400M on investment fees while the funds lost $19B in assets.

It is ironic that in the midst of theses losses NYCERS earns a guaranteed 7% rate of return on loans to NYCERS members.

While the assets have been shrinking, the benefits have been exploding. In 2009, the five pension funds will pay out $9.9B. This is an 80% increase from the $5.5B pay out in 2000.

The city’s budgeted pension contribution for 2010 is $6.4B (with a phantom $200M projected savings). That is 17.5% of the total city payroll. While this amount is obscenely out of proportion to the payroll, it is significantly short of what is needed to properly fund the current pension benefits. In fact, the city’s contribution to the FDNY pension fund is $874M, well over 80% of the firefighters’ payroll. In FY-2008, however, this retirement system was only 56% funded.

In addition to the city’s contributions, the city’s 240,000 workers will be required to contribute over $755M to the pension funds in 2010.

On July 1, 2009, the governor signed the extension bill for Tier 3 &4. Because of his previous veto of the police & fire Tier 2 extension bill, all new police officers and firefighters are in Tier 3. While this 33 year old law has never been analyzed for police & fire benefits, it is reasonable to assume these benefits are less costly than the Tier 2 benefits.

This sets the stage for a rewrite of pension benefits for all new NYS employees. While employees are entitled to decent retirement benefits, employees will be at risk, if those benefits are not sustainable.

If new employees benefits are reduced, then future investment policy must be based on a conservative, highly transparent strategy with minimal management costs.

In addition, there can be no campaign contributions allowed at any time from any firm or their employees & spouses, who have contracts with the pension firms, to any person who makes decisions effecting those contracts. Without this change, the investment process will continue to rot.

Also as part of the reform, there is a need for a mandatory minimum/maximum contribution by the city and participating employers. If the employees are required to pay 3% of their pay checks, then the city should always pay at least 6% and cap its upper liability at 10% for new employees and new benefits. This would be a big incentive to keep the investment strategy conservative and not let the benefit structure get out of hand.

Funding a pension system is a simple process and if done with integrity, almost never fails. If you consistently contribute 12% of income to a fund and invest the money wisely, in 30 years with a 6% percent rate of return, you have a 50% pension at age 62. Why do some many pension funds fail? Without effective oversight, people tend to stray. It is telling that the NY State Insurance Department has not issued an audit of any of the city pension funds since 1999. On June 25, 2009 the Insurance Department finally issued the audit for NYCERS covering FY-2000 to FY-2002. Better late than never.

There is now a real danger to the pension benefits of city workers and retirees. Underfunding, bad investment decisions, and excessive benefits are the death kneel for a pension fund.

Note: From 1989 to 1999, the NYCERS assets rose from $16.5B to $41.0B. From 1999 to 2009, those same assets fell from $41.0B to $29.8B and the funded status has dropped from 136%. to 80%.