Nicely done.

Now, isn't what in other cities we would call 'corruption'?

 

Spot on comments, Haik. I missed this story, been away.

 

Perhaps if he had invested wisely in the first place, this could have been avoided.

 

City attorney finds Keleher pension legal
Published: Sunday, January 13, 2008
By John Briggs
Free Press Staff Writer
Burlington City Attorney Ken Schatz said in a report to the City Council last week that the city pension awarded in September 2005 by the Board of Finance to former Chief Administrative Officer Brendan Keleher is legally defensible.

The council, through its inattention to the action of the board, in effect sanctioned its decision, Schatz said.

The report, which was made public late Tuesday afternoon after a Monday council meeting, said Keleher violated the city charter by participating in the discussion of his pension by the board. The report, however, said nothing in the city charter "indicates that a vote would be voided if a City Officer appropriately abstained from voting but inappropriately participated in the discussion."

Keleher was a member of the Board of Finance, which made the decision on his pension. He did not vote on the question.

Keleher, the city's top financial officer during the administration of former Mayor Peter Clavelle, formally chose not to participate in the city's retirement plan when he began working for the city in 1990. Instead, he accepted city payments into his personal investment plan. The Board of Finance in 1990 approved his opt-out decision.

In September 2005, approximately two months before Keleher announced his retirement, Clavelle asked the Board of Finance to allow Keleher to join the pension system, with pension credits retroactive to 1990. He also requested that his top financial officer be allowed to keep the payments the city had made over the years into his private plan. He made no mention of the interest those payments had earned.

Clavelle said in an explanatory memo to the board that allowing Keleher to keep the money from his private plan would compensate Keleher for years of underpayment. Clavelle also argued that allowing Keleher into the pension system would act as an inducement to keep Keleher on the job. The board unanimously approved the request.
In December 2005, after Keleher's retirement, the City Council accepted the minutes of the September board meeting, but it didn't discuss Keleher's pension arrangement.

Chief Administrative Officer Jonathan Leopold said in November that the total city pension payments to Keleher, based on calculations from actuarial assumptions, could amount to $510,000. Keleher was 59 when he retired from the city to take another job. City officials have said the arrangement with Keleher was unprecedented.

The city attorney's report was a response to a City Council resolution of Oct. 22 requesting an analysis of the Board of Finance decision and a determination of whether the board decision in 1990 for Keleher to opt out of the system or the decision in 2005 to award the pension amounted to contracts.
Schatz said in his report that while the City Council gave itself the sole authority in 1986 to allow city employees not to participate in the retirement system, it subsequently ignored that requirement. In at least two subsequent instances, including Keleher's case, Schatz said, the Board of Finance authorized opt-outs on its own without council objection.

The council's subsequent annual reappointment of Keleher over the years, the report said, "arguably ratified" the 1990 board's decision to allow Keleher not to participate in the city's pension system.

Schatz said the council response in 2005 following the Board of Finance decision to award Keleher a pension implicitly delegated authority to that board to "bestow," in the report's words, a retroactive pension on Keleher. The City Council had notice of what the board had done, Schatz said, "but no member of the City Council questioned or requested a review" of the action. "Nor," he said, "did any member of the City Council question the authority of the Board of Finance to take this action."

Schatz, who likened his report to the "risk/benefit assessment we frequently provide to the Council when the City is sued," cautioned the council that "any assertion by the City that the 'opt-in' action was not a valid contract" could be disputed. "An argument can be made here," Schatz said in explanation, "that former CAO Keleher relied upon the action of the Finance Board," believing that not only he, but the Board of Finance and the City Council understood the board had the authority to allow him retroactive entry into the city's pension system, as well as to retain the payments the city had made to his private plan.

One section of Schatz's report deals with the question of conflict of interest. He cited Section 133 of the city charter, which in its full text prohibits city officers from participating "in any fashion at any level, formally or informally," in an issue "in which the city officer has a direct and immediate financial interest." A city officer who engages in such behavior, Section 133 says, "shall be regarded as guilty of bad conduct."

"Former CAO Keleher appropriately abstained from voting on this matter," Schatz wrote. "In our view, he should have also abstained from participating in the discussion and should not have responded to other Board members' questions." A transcript of the board meeting prepared by the Clerk-Treasurer's Office and based on a tape recording of the meeting, shows that Keleher participated in the discussion on his pension.

Keleher declined to comment for this story. He said previously that "the Board of Finance was of the opinion that in lieu of a number of years without a pay adjustment the decision as made was fair." Clavelle, too, described the board action and the subsequent acceptance by the council in December 2005 of the board's minutes as "transparent" and "fair."

Russ Ellis, D-Ward 4, voted with five other councilors against the October resolution that led to the Schatz report. The report, he said, "has vindicated what I thought at the time.
"From my point of view," he said, "I think the matter to some extent is a closed issue. I don't think the city is going to pursue any further action, because there doesn't appear to be any legal grounds for it. My major response to this is that proper procedures for dealing with opt-out and opt-in were not in place. I think it's important for the council to make sure that we do have proper procedures in place for making these decisions."

Craig Gutchell, R-Ward 7, has been outspoken in his criticism of the pension arrangement. "I'm not happy by any means," Gutchell said of the Schatz report's conclusions, "but I'm realistic. I would like to see us, in some fashion, go after him," he said of Keleher.

Andy Montroll, D-Ward 6, said Schatz had provided the council with a "legal analysis, rather than whether" the board's award of the pension to Keleher "was good or bad policy.

"I'm seeing how, from his analysis, things weren't done as cleanly as they should have been done," Montroll said, "but it didn't seem to rise to a fatal flaw in the granting of the pension by the Finance Board.
"At the same time," Montroll said, "I would not have granted the pension in this way. As a policy matter, I don't think (Keleher) should have gotten two pensions."

Keleher said in a Nov. 15 letter to the Free Press that references to two pensions are "deliberately misleading and malicious." He said the payments made by the city into his private retirement plan "are more appropriately classified as compensation."

The City Council is considering modifications to the city rules dealing with opt-outs and opt-ins to the city's pension system, and it began discussions Monday on how to characterize the receipt of Board of Finance minutes by the council.

Contact John Briggs at 660-1863 or jbriggs@bfp.burlingtonfreepress.com

RESOLUTION

On October 22 the Burlington City Council passed a resolution, "Retroactive Pension Bestowed Upon Former CAO Keleher," asking City Attorney Ken Schatz for a timeline of the acts leading to the granting of the city pension to Brendan Keleher, a determination of whether the council voted on the matter, and whether Keleher's decision to "opt out" of the pension system in 1990, when he began working for the city, or the Board of Finance decision in 2005 to let him "opt in" to the system, amounted to contracts.

The resolution passed 8-6.
Voting in favor: Ed Adrian, D-Ward 1; Jane Knodell, P-Ward 2; Kurt Wright, R-Ward 4; Joan Shannon, D-Ward 5; Andy Montroll, D-Ward 6; Barbara Perry, I-Ward 6; Paul Decelles, R-Ward 7; and Craig Gutchell, R-Ward 7.

Voting against: Sharon Bushor, I-Ward 1; Cheryl McDonough, P-Ward 2; Tim Ashe, P-Ward 3; Clarence Davis, P-Ward 3; Russ Ellis, D-Ward 4; and Bill Keogh, D-Ward 5.
Bushor was a member of the Board of Finance in 2005 that voted unanimously to allow Keleher a city pension and to retain the money the city had paid since 1990 into his private retirement plan.