Report: Town Was Sloppy on Pension Decisions; Mallozzi: We'll Clean up

Over the course of years, New Canaan officials violated the Town Charter multiple times when they made decisions on town pensions, both for general rules and in the specific case of calculating a higher pension than the rules allowed for former First Selectman Jeb Walker.

Here are some of the town's pension misdeeds, as determined by Garrett A. Denniston, a lawyer from an outside law firm the town hired to examine various pension decisions (report attached to this article):

• Former town Chief Financial Officer Gary Conrad didn't have the authority to grant Walker the pension benefits of a five-year vested retiree, even though he did just that. "Both [Walker and Conrad] were in a position to know that their actions in approving the benefits were improper," Denniston wrote, because they sat on the Pension Committee that administers town pensions.

• On at least one occasion, the Town Council didn't follow requirements of state law when it voted to retroactively approve the higher benefits for Walker. According to Denniston's report, the Town Council needed a "qualified cost analysis from an enrolled actuary," as required by state law, before acting. It didn't have one. Therefore, "the Town Council's later vote to retroactively approve the benefits approved by the former CFO is of no effect."

• "In 2007, the Board of Finance voted to modify the employee group insurance plan and eliminate the employee contributions for retired officials and employees." But according to the Town Charter, Denniston wrote, only the Town Council can establish or modify the insurance plan by adopting or rejecting a recommendation approved by the Board of Finance. Under state law, the Town Council also would have needed a qualified cost estimate from a proper actuary.

• "In 2011, the payroll benefits administrator disseminated an email purporting to reverse the 2007 decision and require a 13 percent employee contribution to the health insurance for non-union employees." The 2011 email was no more in compliance with the Town Charter than the 2007 vote had been, and "for the same reasons," Denniston wrote.

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Denniston cautioned against the town trying to recover money improperly given to retirees as a result of the 2007 decision, giving two reasons for doing so: First, it might be considered unfair to retirees who had received the money in good faith and made financial decisions based on it to then be told they'd have to return the money. Second, because once the town led retirees to expect that money, courts might well rule that the retirees have a legal right to it.

Walker has agreed to return $4,300 in overpayments on his pension to the town.

Another consideration in whether or not to get money improperly paid out to a retiree is whether the cost of doing so starts rivaling the benefit. Filing a lawsuit to recover money can be quite expensive, Denniston pointed out. Reducing future payments (called "recoupment"), on the other hand, could be effective.

"It is our opinion that the town should revise the [pension] plan to provide a method of recovery of overpayments," Denniston wrote. First Selectman Robert Mallozzi said he expects the town to do that.

If Walker and Conrad intended to grant Walker pension payments they knew he had no right to receive, then "it is possible that the conduct constitutes a criminal violation such as larceny or theft," Denniston wrote. But if the decision to grant higher payments was made by mistake, "it is equally possible there is no criminal wrongdoing."

The town Pension Committee should decide whether to refer the matter to police, he wrote.

"[T]here is reason to believe" that both Conrad and Walker violated the town's Code of Ethics in granting the higher pension to Walker, Denniston wrote. Since neither is a town employee any more, there is little the town could do to sanction them, he wrote.

Mallozzi's reaction to the report

Mallozzi issued a written statement Tuesday morning that set out various things he intends to do "to prevent this from happening in the future." His statement, along with Denniston's report, were both posted on the Home page of the town website (and are each attached to this article).

"There are still questions to be answered such as the status of medical benefits awarded to retired elected officials and certain definitions we need to have in place regarding the status of former elected officials," Mallozzi wrote.

Town Attorney Ira Bloom and his law firm will help the town figure out answers to those questions, with the cooperation and advice of the Board of Finance and Town Council, Mallozzi wrote.

Mallozzi also listed several steps taken so far that should help to prevent the town's past pension mistakes:

• "A new CFO was hired in May. I can't emphasize enough the implications and the importance of this single action," Mallozzi wrote.
• The Pension Committee now meets more regularly, more often, with agendas and minutes posted ("not a consistent process in the past," according to Mallozzi).
• The Pension Committee now approves all disbursements, not just disability benefits. "This is a major change and, had this been the case prior to my arrival, and [it] would have certainly prevented the overpayments we have just reviewed."
• The pension plan document will get new language to clarify how the town may recover money improperly sent to retirees.
• A "whistle blower" policy has been drafted to deal with anonymous complaints from town employees.
• Mallozzi said he has "instructed HR [the human resources director] to conduct exit interviews in October of the year a non-returning elected official is leaving office. The meeting will cover expected benefits and other issues and will be held with the HR director in the presence of the administrative officer. The pension committee will have final vote on benefits during a November meeting."

Additional coverage on this topic:

• Mallozzi: Town Will Halt Excess Payments to Jeb Walker
• Mallozzi Seeks Clarification of Process Behind Pension Fund [Updated]