What's It Like Having Your Ex Working For You?

In November, 2005, Martha Stark and the other NYCERS Trustees knowingly hired a totally unqualified person off of Shelley Silver's staff to be the executive director of NYCERS. That person was Diane D'Alessandro.

On Monday, November 30, 2015, D'Alessandro hired a woman named Ellen Carton as a "deputy director" of HR at NYCERS. What is significant about this fact is that she was the domestic partner of D'Alessandro for over 18 years.

NYCERS's claims the relationship was legally ended in 2004. I am not sure how you end a domestic partnership as opposed to a marriage.

What rational chief executive hires her ex spouse as a senior HR manager for her organization? You would never hire your current spouse, never mind your former spouse. It is a mind blowing concept. The potential conflicts would make for a fabulous novel but not a well run organization. But, unfortunately, we all know we are not dealing with a well run organization.

It now seems that the NYC Department of Investigation is looking into this story.

Ms. Carton was appointed at a salary of $127,000/yr. There was no public posting for the position. NYCERS states that Ms. Carton is reporting to Ms. Vilma Ebanks, the deputy director of HR at NYCERS. It is unclear what Ms. Carton's HR qualifications are, if any. According to Carton her consulting practice had closed.

In May of 2014, D'Alessandro hired Ms. Ebanks as a "deputy director" of HR at a salary of $115,000. Again there was no posting for that position. Ebanks had worked at DC-37 for many years before moving to NYCERS. Fourteen months later, Ebanks salary was increased to $131,000.

On a side note, It appears that Ms. Ebanks lives with Michael Musuraca. For many years Musuraca represented DC-37 on the NYCERS Board of Trustees. He was on the Board in 2005 when the Board appointed D'Alessandro. In 2009 he went work for a private equity firm, Blue Wolf Capital, but not before he voted to hire Blue Wolf as private equity firm for NYCERS. Here is a little more background on Blue Wolf.

Both of these hirings follows the same pattern that D'Alessandro used when she hired Diane Bratcher.

As of June 30, 2015, the NYCERS HR division was a direct report to the executive director, Diane D'Alessandro. This has been the case since 1998 when I first created the HR division. As of June 30, 2015 Ms. Felita DiLorenzo (aka Baksh/Ramsami) was running the HR division and reported to D'Alessandro.

NYCERS now claims that Ms. Ebanks is the HR director and reports to Ms. Chiarello, the NYCERS deputy executive director. That is the number two person in the agency.

Note: As of June 30, 2017 the HR division is again reporting to the acting executive director, Karen Mazza.

As part of this story, in July of 2013, NYCERS entered into a contract with a small two person firm out of Tempe, AZ. The name of the firm is CWI Coaching & Consulting. The principals of the firm are Bruce and Kathleen Clark. Ms. Clark is the main contact with NYCERS. It is unclear how CWI was chosen to do whatever they are supposed to be doing for NYCERS. The original contract was for $80,000 but it was modified upwards during the year to $130,000.

Ms. Clark claims to have been introduced to Ms. Carton in NY in 2013. Based on Ms. Clark's response to whether D'Alessandro introduced the two, it is reasonable to assume that D'Alessandro made the introduction.

Shortly after that Ms. Carton started working with Ms. Clark on the NYCERS project. That may have the reason for the budget modification.

NYCERS actually paid CWI $129,736 in FY-2014 and $99,965 in FY-2015.

Going forward NYCERS has an open contract with CWI for the FY-2016 through FY-2018 period. The quoted cost for FY-2016 is $140K,000, for FY-2017, $161,000, and for FY-2018, $185,000.

Based on a December 10, 2015 Board of Trustees presentation by the IT deputy director, Liz Reyes, CWI appears to be a big player in the $132M Legacy Replacement Project. Needless to say, Reyes is in the same boat as D'Alessandro.

NY Times - Pensions - Detroit

On July 20, 2013 Mary Williams Walsh wrote the following highlighted article in the NY Times concerning the newly discovered deficit in the two Detroit municipal pension plans and the city's pending bankruptcy action. Ms. Walsh has written many pension articles in the past. Like most commentators on public pension plan issues, however, she never addresses the whole picture. Not that what she reports is necessarily incorrect but that it is incomplete.

For the record, the one issue I never hear reported is the miserable investment performance of public pension plans and how much this contributes to pension underfunding. There are also many questionable investment decisions that the NY Times never reports. It's a great newspaper but it's not always on the cutting edge.

In this article Ms. Walsh points out a sudden increase in Detroit's reported pension underfunding and lays a large amount of blame at the door of widespread actuarial practices which have lead to long term shortfalls on employers' contributions to most public pension systems around the country.

This is a valid and accurate statement but it is not a secret. Everyone in the public pension community knows that the plan actuaries have not been providing good numbers for a long time. Their chief sin has been the use of investment targets that are far to high. This has systematically lead to underfunding of the plans. It has also lead to reckless investment strategies adopted by plan trustees trying to hit the unrealistic targets. It also created the excuse to hire investment firms with outrageous fee structures.

Generally actuaries are very bright mathematicians but like all of us they are usually short on courage. No one wants to lose his/her job. That is what would happen if an actuary came in with the real numbers. So, they do what most of us would do. They bend and twist to keep the parties with power happy.

Below is an extract from Ms. Walsh's article that describes this problem. Towards the end of the extract Ms. Walsh mentions a "Blue Ribbon Panel" set up by the Society of Actuaries which was formed to look into how to address the reputational risks that "bad" numbers were creating. One of the panel members that she idnetifies is Robert North, the NYCERS and NYCTRS actuary. North has a questionable history on his own interest rate assumptions for the city pension funds. I listed below the interest rate changes he has recommended while working for NYCERS. Walsh doesn't seem to be aware of the inconsistency in having North on this panel.

This made me do a little homework. I checked the Society of Actuaries web site and listed all the panel names below. One of the names that Walsh did not identify was Mike Musuraca. For many years Musuraca worked for DC-37, a municipal union with a recent history of corruption while he was working there. He represented DC-37 on the NYCERS Board of Trustees for investment issues. In 2009 he went work for a private equity firm, Blue Wolf Capital, but not before he voted to hire Blue Wolf as private equity firm for NYCERS. Here is a little more background on Blue Wolf Blue Wolf.

When someone like Walsh has these issues in front of her and she doesn't address them, you wonder whether she serious about the problem.

Extract from NY Times article, July 20, 2013

But that is not what happens. To calculate a city’s pension liabilities, an actuary instead projects all the contributions the city will probably have to make to the pension fund over time. Many assumptions go into this projection, including an assumption that returns on the investments made by the pension fund will cover most of the plan’s costs. The greater the average annual investment returns, the less the city will presumably have to contribute. Pension plan trustees set the rate of return, usually between 7 percent and 8 percent.

...

A few years ago, with the debate still raging and cities staggering through the recession, one top professional body, the Society of Actuaries, gathered expert opinion and realized that public pension plans had come to pose the single largest reputational risk to the profession. A Public Plans Reputational Risk Task Force was convened. It held some meetings, but last year, the matter was shifted to a new body, something called the Blue Ribbon Panel, which was composed not of actuaries but public policy figures from a number of disciplines. Panelists include Richard Ravitch, a former lieutenant governor of New York; Bradley Belt, a former executive director of the Pension Benefit Guaranty Corporation; and Robert North, the actuary who shepherds New York City’s five big public pension plans.

The commplete list of members of the Blue Ribbon Panel

Chair: Bob Stein, FSA, MAAA, Retired, Ernst & Young
Co-Vice Chair: Andrew Biggs, American Enterprise Institute
Co-Vice Chair: Douglas Elliott, Brookings Institution
Bradley Belt, Palisades Capital Management, former executive director of the Pension Benefit Guaranty Corporation
David Crane, Stanford University, former advisor to Gov. Arnold Schwarzenegger, CA
Malcolm Hamilton, FSA, FCIA, Retired, Mercer, senior Fellow, C. D. Howe Institute
Laurence Msall, The Civic Federation (Illinois)
Mike Musuraca, Blue Wolf Capital Partners, former trustee of the NYC Employees Retirement Systems-NYCERS and formerly of American Federation of State, County and Municipal Employees
Bob North, FSA, EA, MAAA, FCA, FSPA, New York City Office of the Actuary
Richard Ravitch, Co-chair, State Budget Crisis Task Force, formerly Lt. Governor of New York
Larry Zimpleman, FSA, MAAA, Principal Financial Group

Assumed Interest Rate History under Robert North (1990 to 2013)

1. 7/1/1995 9.0% to 8.75%
2. 7/1/1999 8.75% to 8.0%
3. 7/1/2011 8.0% to 7.0% (net of fees)

I don't have the documentation describing the origin of the 9% rate and my memory is a bit weak that far back. It is quite possible, however, that North also make the recommendation for 9%.