Lawyers' pension credits probed

Monday, May 24, 2010 - The Record

State auditors are investigating how a dozen attorneys won public pension credits in recent years despite a heavily publicized reform law signed by Gov. Jon Corzine in June 2007.

"There has been an ongoing review of this situation for several months now and the findings will be forwarded to the Attorney General's Office for prosecution, if warranted," said Andrew Pratt, a spokesman for the state Treasury Department.

The lawyers in question have all been hired as employees by towns or other local government agencies while maintaining their private practices and, in some cases, membership in large law firms, Pratt said. Such an arrangement gives what are essentially private businesspeople access to the state pension system and the promise of taxpayer-financed retirement and health-care benefits.

Pratt said more than 40 towns or local government agencies have been contacted as part of the investigation. He declined to release a list of agencies or attorneys who are subject of the inquiry. He did confirm, however, that prominent South Jersey attorney Timothy J. Higgins is among the group of attorneys whose pension status is under review.

Higgins has served as municipal attorney or prosecutor for a half-dozen Camden County towns. His office did not respond to requests for an interview.

News of the probe shows how economic realities are reshaping the public-employment landscape in New Jersey, as even perquisites that were once commonly enjoyed by those at the top of the political food chain have come under scrutiny. The Corzine reforms barred attorneys and others working for government under professional services contracts from state pension rolls.

New Jersey's public pension system is famously packed with political insiders, party loyalists and professionals who entered the state benefit system via part-time public jobs. The practice flourished in an atmosphere in which the state seemed to have more than enough money to keep benefits flowing to its quarter-million public retirees.

For most of the past decade, however, New Jersey's treasurers have skimped on annual payments to a retirement system that is now underfunded by some $40 billion, according to state figures. Amid a deep recession, calls for pension reform are now commonplace among politicians of both parties, including many who themselves abetted the dysfunctional system by placing friends in part-time public jobs.

Among the professionals who have benefited under the old system are several high-profile lawyers from Bergen County.

Michael DeCotiis, a former chief counsel to Gov. James E. McGreevey and a partner in the Teaneck firm that bears his name, entered the state pension system via a part-time public job in Edgewater, where his firm had been hired as counsel to the borough's sewerage agency.

DeCotiis has continued to collect credit in the pension system not as a public-sector attorney, but as a McGreevey appointee to the Casino Reinvestment Development Authority board, a part-time job.

Arrangements like the one with Edgewater were "the customary practice of many public entities" and helped save costs by reducing retainer payments, a spokesman for the firm said in a written statement to The Record.

"Enrollment in the state pension system was a collateral and customary aspect of employment within the borough, including attorneys representing the borough and its various boards," according to the statement.

The salary DeCotiis earned in Edgewater was minimal, but allowed him to start earning pension credits seven years before he became McGreevey's full-time chief counsel.

Others include former Bergen County Democratic Chairman Joseph Ferriero, who was credited with a salary of nearly $60,000 for his work as counsel to the Passaic Valley Sewerage Authority, and Dennis Oury, whose legal work for a string of public agencies boosted his pensionable salary to over $200,000 in 2007.

Both Ferriero and Oury have been convicted on federal fraud charges unrelated to their pension enrollment.

Last week, Governor Christie, who has already signed measures curtailing pension abuse, proposed even more far-reaching pension reforms as part of a 30-bill tax relief package.

But reforming the state's pension system and its byzantine bylaws has proved elusive.

In late 2007, as towns and local agencies prepared to enact the pension ban on newly hired lawyers, state officials worried that some insiders were already preparing ways to get around it.

On Dec. 29 of that year, three days before the ban went into effect, the Department of Community Affairs sent a memo to communities reminding them of the new law and warning that "it has become clear … that some employees or contractors may seek to find ways to continue … as a member of the pension system."

Lisa Ryan, a spokeswoman for the department, said the new law is "by and large" being enforced, but she did not provide data on possible abuses.

Questions raised

In December 2009, state Inspector General Mary Jane Cooper published a REPORT that raised a series of questions about the state's ability to enforce its own pension rules and scrub benefit rolls of undeserving beneficiaries.

Cooper cited the example of South Jersey attorney Michael Angelini, who had built up a future pension payment in excess of $100,000 annually by holding a series of part-time public jobs with state and local agencies at the same time he was running a private law practice.

Over the years, Cooper found, Angelini had held up to seven public jobs at one time but often had subordinates do some of the legal work for him.

In addition, he did not seek approval for his part-time work from the State Ethics Liaison, as is required by law.Angelini's arrangement, which Cooper said appeared to run afoul of federal IRS guidelines differentiating private contractors from bona fide employees, is under review and he could lose his pension credits, officials said.

The attorneys being looked at were singled out from a list of 20 that Cooper sent to the state Division of Pensions and Benefits in December in the wake of her Angelini probe.

Beyond Angelini, Cooper concluded that the Pensions Division was ill-equipped to do even the most basic work of checking the pension applications of recent retirees: The division cannot subpoena information or swear witnesses, has no investigator to weed out fraud, no power to levy fines or take action when fraud is detected, and no way to verify information provided by retirees.

While Cooper made a series of recommendations, including offering to enter into an enforcement agreement with the division similar to that enacted by the scandal-ridden Schools Development Agency, the Pensions Division has not yet taken any action.

Echoes of earlier audit

Some of Cooper's findings echoed those found almost a decade earlier by state Auditor Richard Fair.

His August 2000 report concluded that state pensions officials had no way of detecting fraud among applicants and could not even verify if people collecting pensions were truly even retired or still working somewhere in a state job.

Officials told Fair at the time that they had to "rely on employer competence and honesty … backed by the oversight of conscientious citizens" and press reports.

The Pensions Division did not respond to requests to be interviewed for this story. When pressed by The Record, Pratt, the Treasury Department spokesman, acknowledged that making any substantial changes in the pensions bureaucracy has been difficult.

"These issues are tremendously difficult," Pratt said. "It is not easy to police the activities of thousands of retirees. There is also a lot of resistance to any kind of change."

The current probe, Pratt said, is for now the Pensions Division's best answer to Cooper and others who documented problems in an unaccountable pension system.

"What's Pensions doing? They are doing this investigation," he said. "And they will not hesitate to take their findings to the attorney general for prosecution if they see fit."