July 6, 2008
Pension Defense Cites Ex-Workers; Officials’ Words Used; to Parry County Lawsuit
By STEVE SCHULTZE
The ghosts in Milwaukee County's pension scandal are speaking out, their words carefully combed through by lawyers for a multinational financial firm hoping to defeat a $100 million county lawsuit.Mercer Inc. is fighting county claims that it was the company's fault the 2000-'01 pension deal included a "backdrop" lump-sum retirement benefit that hadn't been scrutinized. Mercer, as the county's actuarial consultant, should have notified officials of the backdrop's potentially massive cost, according to the county's lawsuit.
In its motion to have the suit dismissed, the company has enlisted the words of former County Executive F. Thomas Ament, who quit in the face of a likely recall over the backdrop; Gary Dobbert, the ex-county human resources director convicted of misconduct in office for lying to the County Board about the benefit cost; and several current and former county supervisors. A trove of sworn statements and investigative reports filed in federal court by Mercer provides extensive comments from key figures in the county pension tumult.
Ament puts the onus on Dobbert as the creator of the so-called backdrop, which generated a public uproar over its potentially lucrative payouts.
"The one fact I think is a fact that everyone agrees on is that the . . . backdrop (was) developed by Dobbert," Ament states in a sworn deposition. "I didn't . . . mean to give the impression that Mercer developed the concept. I don't think that's true."
The line is used as part of Mercer's argument that the company didn't help draft the county's backdrop plan or know much about it until October 2000. That's when a Mercer actuary claims to have been stunned when Dobbert presented the concept to a County Board panel and listed it as having no financial impact.
Milwaukee County points to the failure of the Mercer actuary to speak up at that meeting and correct Dobbert's claim that the backdrop provision was "cost-neutral" in making its malpractice claim against Mercer.
Firm blames county
The county's claims are "an after-the-fact fabrication in an attempt to scapegoat Mercer and to shift the blame away from the mistakes of county personnel like Dobbert and the County Board's own lack of oversight," according to Mercer's motion to dismiss the case.
Milwaukee County has paid out about $134 million in backdrop pension benefits since 2001, county records show. The county has estimated its overall costs linked to the 2000-'01 benefit package and other pension enhancements at $600 million and is seeking at least $100 million in damages.
Dobbert gets heavy play in the Mercer filings. He admits creating the backdrop plan, noting he learned about it by attending seminars for retirement managers and doing some Internet research.
"It's not rocket science. I just did it," Dobbert is quoted telling state investigators in a Mercer brief. Dobbert told Mercer lawyers he later regretted the remark.
"I did draft the ordinance. I felt that I knew what the basic components of the backdrop would be," Dobbert says in testimony from his two-day deposition given last August. "I thought I had put together a plan that would be cost-neutral."
Excerpts of deposition testimony and Justice Department investigative reports from Ament, Dobbert and other current and former county officials are included in Mercer's bid to have the county's lawsuit dismissed. The federal case is scheduled for a January trial if settlement talks and Mercer's dismissal bid fail.
County Corporation Counsel William Domina said the county will dispute Mercer's dismissal motion in a formal response July 18.
Since Dobbert's 2002 forced retirement, he has done some part- time work for a friend with a commercial window coverings business, he says in the Mercer filings. Dobbert has made almost no public statements on the pension scandal since his departure from county government.
Dobbert will be vindicated if the Mercer case fully probes the county pension issue, said Todd Weir, Dobbert's lawyer.
In response to a lengthy series of questions at his August deposition, Dobbert says he failed to get a backdrop cost estimate before the County Board first voted on it because he was very busy at the time and had a limited budget for obtaining cost calculations from Mercer. He also was not aware then that state law required actuarial analysis of any pension changes, Dobbert says.
Dobbert did ask for a cost analysis in December 2000 -- after the contract including the pension changes was approved for one group of employees. Mercer came up with a $718,000 estimate for the backdrop provision, which turned out to be strikingly low.
Dobbert confirms in his sworn statement that he had a notebook binder with backdrop information gathered before the county passed its backdrop benefit. A note in the binder, which he acknowledged appeared to be in his handwriting, said: "(Back)drops are new -- little actuarial experience -- be cautious. Always easier to add dollars than to take them away." He says he didn't recall writing the note.
Mercer uses testimony from several supervisors to try to shoot down the county's claim they relied on Mercer to advise them about potential costs of pension changes.
Supervisor Mark Borkowski says he relied instead on advice from Dobbert and other county staff in voting for the package.
"I had no reason to believe that information was being withheld," he says in his deposition. "There were no red flags to me that said that we weren't getting the whole thing."
Supervisor James "Luigi" Schmitt and former supervisors Joe Davis, now a Milwaukee alderman, and Linda Ryan all said they'd never seen anything about the pension package costs. Ament says in his deposition that he also couldn't recall seeing a Mercer cost estimate of the backdrop and other pension costs until after the benefits were approved.
Mercer quotes County Auditor Jerome Heer from his deposition saying the staff fiscal note on the pension deal was "incredibly weak" and "a lousy fiscal note." Mercer uses the remarks to bolster its case that it was bad staff advice and not Mercer's fault that led to the pension package's approval.
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