The Department of Investigation (DOI) recently released a fraud report involving theft of NYCERS checks.
Below is an excerpt from the beginning of the report which was 23 pages long and dealt with the loss of nearly $384,000 from NYCERS. The report, while accurate about the fraudulant cashing of NYCERS benefit checks, is a lot to do about a relatively small issue. DOI rarelly reports a complete accounting of the actual convictions and prison sentences that result from its investigations.
I want, however, to point out specifically the mention of Commissioner Gill Hearn's thanks to Karen Mazza at the end of the excerpt. Of course, Gill Hearn doesn't mention that she has not completed the investigation that DOI had committed to pursue into perjury and corruption charges against Mazza and other NYCERS management staff. I am sure the financial impact of corrupt management at NYCERS is far greater than $384,000.
FOR IMMEDIATE RELEASE
CONTACT: DIANE STRUZZI
WEDNESDAY, MAY 9, 2012
(212) 825-5931
DOI RELEASES PENSION FRAUD REPORT INVOLVING EIGHT SEPARATE CASES IN WHICH INDIVIDUALS ATTEMPTED TO DEFRAUD OR DEFRAUDED NYCERS OF MORE THAN $400,000
ROSE GILL HEARN, Commissioner of the New York City Department of Investigation (“DOI”), released a report today detailing eight recent investigations into fraud upon the New York City Employees’ Retirement System (“NYCERS“), the country’s largest municipal pension system. The eight investigations included in this report are the most recent that DOI has conducted and illustrate a range of fraudulent schemes that include family members and beneficiaries of deceased pensioners taking NYCERS funds they were not entitled to receive and the theft of NYCERS checks by ndividuals who falsely claimed they had not received the funds. These eight investigations identified nearly $384,000 in NYCERS funds that individuals wrongfully obtained and an attempt to obtain approximately $17,200, which was thwarted by DOI and NYCERS. Five of the eight individuals have already been criminally charged and three of those individuals have pleaded guilty, with one individual receiving a 60-day jail sentence just last week. A copy of the report is attached to this release.
...
Commissioner Gill Hearn thanked NYCERS Executive Director Diane D’Alessandro, NYCERS Director of Security Craig Thornton, and NYCERS General Counsel Karen Mazza, and their staffs, for their assistance and cooperation in these investigations.
In 2009, four years ago, the Public Adovcate and the Comptroller, both NYCERS trsutees, requested D.O.I. to investigate a charge of perjury and official misconduct by senior management at NYCERS. As of today there has been no resolution of those charges. The trustees made this request in response to specific evidence that I had given to the trustees of the perjury by NYCERS senior staff.
In 2009, Bill Thompson was a NYCERS trustee and the Public Advocate's office made the actual request for the investigation. In 2010, de Blasio became the Public Advocate and a NYCERS trustee.
Thompson and de Blasio are now running for mayor of New York City. Shouldn't they clear up this unfinished business before they take on the responsibilities of mayor? Scott Stringer was also a NYCERS trustee in 2009 and has equal responsibility for cleaning up this mess.
On February 8, 2010, Attorney General announced agreements with Markstone Capital Group and Wetherly Capital Group and its broker/dealer DAV/Wetherly Financial to resolve their roles in Cuomo’s investigation into pay-to-play practices involving the NYS Common Retirement Fund (CRF). Markstone agreed to return $18M to CRF and Wetherly agreed to return $1M to CRF. Wetherly also agreed to exit the placement agent business.
Wetherly represented three private equity firms before CRF. They were Ares, Freeman Spogli, and Levine Leichtman. Wetherly was paid fees by these firms and then split the fees with Henry “Hank” Morris. NYCERS also has contracts with these three firms as well as Markstone.
In 2005, NYCERS entered into a contract with Paladin Homeland Security, another private equity firm and as of September 30, 2005 has invested $17.83M with Paladin under two different contracts. Actually, the Comptroller negotiated and signed the contract for NYCERS. The trustees are unaware of the terms and conditions of the contract. This is true of all investment contracts that the Comptroller arranges for NYCERS. Other NYC pension funds also have invested funds with Paladin.
From inception till June 30, 2009 NYCERS has paid Paladin $3.5M in fees for both partnerships. NYCERS has scheduled $837,000 for FY-2010 in fees for Paladin.
In fact, the Comptroller directly paid these fees to Paladin. NYCERS has surrendered control of payment of investment fees to the Comptroller. This means NYCERS never knows what is actually being paid by the Comptroller. The fund also does not know when the fees are paid or how they are paid.
This is in clear violation of Section 13-137 of the NYC Administrative Code.
§ 13-137 Payments from funds. All payments from such funds shall be made by such comptroller upon a voucher signed by the executive director of the retirement system.
In 1996, I had a fight with Comptroller Hevesi’s office over his attempt to short circuit this statutory requirement. For some reason the NYC Law Department folded and stated that NYCERS could violate this state law. For the record, this statute mimics the standard accounting practice of two person control, a bedrock of fraud control in any organization.
Here is the punch line. Between 2005 and 2007, Paladin paid $931,236 to DAV/Wetherly. Paladin paid this amount in return for “services” rendered in association with investments made by the NYC pension funds with Paladin. This information was included in a report prepared by Paladin and submitted to CALPERS as part of CALPERS effort at full disclosure of third party activity surrounding CALPERS investments.
November 16, 2009 - This is an update on the DOI perjury investigation of the NYCERS HR director, Felita Baksh (aka Ramsami). Listed below are letters between the NYCERS trustees and myself with respect to this investigation.
It is clear from the letters, that the trustees are ignoring this issue. I thought the November 3, 2009 election would have provided the trustees with a date for action. They are, however, still allowing this woman to put the agency at risk.
This year Baksh again lied under oath. NYCERS is currently trying to terminate a long time employee because she allegedly incorrectly claimed to have completed three cases on a weekly production report. This employee had previously reported the agency to DOI. That did not make the current executive director happy.
At a disciplinary hearing at OATH for this employee, Baksh lied about a conversation she had with the employee. Since it was a two person conversation, she felt free to deny saying what the employee claimed she had said. The employee, however, had the good sense to record the conversation unbeknownst to Baksh. There is now evidence of two instances of perjury by Baksh.
NYCERS had the nerve to threaten the employee with disciplinary charges for recording the conversation. You can’t make this stuff up. Of course, the NYCERS legal director, Mazza, was involved with the OATH hearing, so anything is possible. This was months ago and there is still no decision from OATH. That is not a good sign.
For the record, this savvy employee also has an EEO action against the agency which is moving into a trial stage. In light of my recommendation to the trustees to put Baksh on paid leave while the investigation is going on and their refusal to do so, it is disturbing that NYCERS felt it necessary to put this employee on paid leave for the last nine months along with a 30 day suspension without pay. Remember perjury is a criminal charge.
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August 12, 2009
Greg Floyd, President – Teamsters Local 237
Trustee, NYCERS Board of Trustees
216 West 14th Street
New York, NY 10011
Pub. Adv. Case #: 140753
Dear Trustee:
This is a follow up to a letter I sent to most of the trustees in March, 2009.
The original letter provided the trustees with evidence of perjury by the current NYCERS HR director, Felita Baksh.
Only one of the trustees, the Public Advocate, took any action with respect
to this evidence. The Public Advocate forwarded the charge to the Department of
Investigation (DOI) for its review and notified me of her action.
As of today, I have received no notice of any subsequent action in this case.
As reference, I am enclosing a copy of a May 9, 2009 letter that I sent to DOI
Concerning this matter. Please notify me of the status of this investigation.
In the interim, the trustees should immediately place the HR director on
administrative leave, since this is a criminal matter and the investigators already have clear evidence of the crime (an audio tape of DOI sworn testimony)
in their possession.
Sincerely yours,
John J. Murphy
Cc: Ms. Susan Edelman, NY Post
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THE CITY OF NEW YORK
OFFICE OF THE COMPTROLLER
GENERAL COUNSEL
1 CENTRE STREET. ROOM 614
NEW YORK, N.Y. 10007-2341
TELEPHONE: (212) 669-2048
FAX NUMBER: (212)815-8714
WILLIAM C. THOMPSON, JR.
OMPTROLLER
Lewis Finkelman
DEPUTY COMPTROLLER FOR LEGAL
AFFAIRS/GENERAL COUNSEL
August 19, 2009
John J. Murphy
Dear Mr. Murphy:
I write in response to the letter that you mailed to the
Comptroller on August 14ft and that was forwarded to me yesterday,
regarding your allegations of perjury by Felita Baksh, a current
employee of NYCERS. Your initial letter to the Comptroller in March
2009 regarding this matter was also referred to me and, at or about
that time, I promptly contacted the Department of Investigation ("DOI")
and forwarded your letter to that agency for its handling. Your most
recent correspondence makes clear that you have referred this matter to
DOI as well. Accordingly, you should follow up directly with DOI as to
the status of its investigation of this matter.
Very truly yours,
Lewis Finkelman
LF/lm
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August 23, 2009
Mr. Lewis Finkelman
Office of General Counsel
Office of the Comptroller
1 Centre Street, Rm. 614
New York, NY 10007
Pub. Adv. Case #: 140753
Dear Mr. Finkelman:
Thank you for your August 19, 2009 letter in which you acknowledge my March
20, 2009 letter to the Comptroller and notifying me that you had referred the reported perjury charge to DOI.
The Public Advocate had already promptly notified me in an April 29, 2009
letter that she had referred this work related perjury charge against the NYCERS HR director to DOI. The Public Advocate also sent me a copy of her
April 14, 2009 letter to Rose Gill Hearn.
The purpose of my August 12, 2009 letter to the NYCERS trustees was to find
out the status of that investigation.
It would appear from your August 19, 2009 letter that you also do not know the
status of that investigation.
DOI has never given me any acknowledgement of this matter in spite of my
Direct correspondence to Rose Gill Hearn or Richard Sullivan.
The Comptroller, as a NYCERS trustee, is employing this person as the
NYCERS HR director. This is while she is under investigation for perjury with
respect to her official duties at NYCERS. DOI has the audio tape on which she
intentionally lied under oath while being interviewed by DOI in 2004.
As a NYCERS fiduciary, the Comptroller should be protecting the fund from
this employee. He has hard evidence that this employee committed perjury.
I strongly recommended that the trustees place this employee on administrative
leave until the investigation is completed. I also request that you notify me
whether you adopt this recommendation and, if you don’t, why not.
DOI can not provide the trustees with protection from misdeeds by this
employee while she is under investigation. The fact that DOI is possibly complicit in the perjury charge makes this action more imperative.
In 1986, the trustees dealt with perjury in a rapid and ruthless manner. Why
Such a casual attitude now?
Sincerely yours,
John J. Murphy
Cc: Mr. Michael Barbaro, NY Times