SCANDAL: City officials stole billions. Overpayment 'theft' of pension funds helped pushed Detroit over the brink and into bankruptcy
City overpaid billions of dollars, leading to calamitous bankruptcy
According to a review board, Detroit's municipal pension fund made payments over the years to retirees, active workers and others above and beyond normal benefits. This "easy street" for some spelled disaster to this once proud American city, costing Detroit billions of dollars - finally pushing it over the edge into bankruptcy.
Detroit's auditor general and inspector general have been examining the pension system for possible fraud or misfeasance since June.
These allegations are according to reports by an outside actuary and other people intimately knowledgeable.
The amount received by each recipient has not been divulged. But available records suggest that the trustees approving the payments did not discriminate; nearly everybody in the plan received them. Most of the trustees on Detroit's two pension boards represent organized labor, and for years they could outvote anyone who challenged the payments.
Detroit's auditor general and inspector general have been examining the pension system for possible fraud or misfeasance since June. The report is expected this week. The report is expected to determine how much negative impact the over payments had.
"It was like dandelions," Joseph Harris, who served as Detroit's independent auditor general from 1995 to 2005 says. "You just accept them. They were there, something you've seen all your life."
When asked on what legal authority the trustees made the payments, Harris said, "My understanding was, it had to be approved by City Council, and council was under the belief that the money was there - that the pension funds were earning the money - with the consideration that in bad times the city would be making up the difference. I hate to say that. Ultimately the fund has to be funded by the taxpayers."
Tina Bassett, a spokeswoman for Detroit's pension trustees said she thought the outside actuary's analysis, which concluded that the extra payments had cost the city nearly $2 billion over 23 years, was "not being fully straight with what happened."
"People were having a hard time, living hand-to-mouth, and we thought we would give them some extra," Bassett said.
Of all the non-pension payments, Bassett said, 54 percent went to active workers, 14 percent went to retirees and 32 percent went to the city, which used its share to lower its annual contributions to the fund.
The excess payments were often made near the end of the year, when recipients needed money for the holidays, or for winter heating.
In a just legal system, the government officials who paid out the "stolen" funds, should be prosecuted and placed in prison. These so-called "public servants" have created an separate class. They should all be voted out. Those who believed they were above the law should be sent to tiny rooms with barred windows for a very, very long time.
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