Riley: I'll Gladly Pay You Tuesday for a Hamburger Today

Riley: I'll Gladly Pay You Tuesday for a Hamburger Today

When the new auditor Segal Co. (Buck was fired 2013 and sued) of Providence’s Pension Fund, revealed three weeks ago that $62 million in Pension fund assets had been overstated and  falsely claimed as an asset for at least 8 years it was not a surprise to me. I‘ve known those assets actually “did not exist”. It should however been a huge surprise to the Finance Committee Chairman John Igliozzi and Mayor Elorza and Lawrence Mancini, because if it was not a surprise to them then they have been purposely “misleading bondholders and municipal investors” and are likely headed to Jail.  The same goes for Angel Taveras and David Cicilline if they knew the assets were false as well. Mr. Taveras is already on record having fired and sued his actuary Buck Consultants and Dan Sherman for a $700,000 dollar error. Now at least 20% of the stated pension assets in Providence have disappeared overnight. The estimated loss of between $62 and $150 million would be the largest Financial Hit to Providence retirees in the history of the City and easily the largest since the crash of 2008. The lost assets exceed any component of the reduced benefits imposed in the Taveras “Category 5” pension reform of 2013.  Surely responsible  media would be all over this. How could it happen? Whose fault was it? Won’t the unions sue for the lost money? Instead there has been silence. A friend, present for the financial committee meeting  that night, said, ” everyone acted like it was no big deal “even Segal.

It is a very Big Deal

At least $62 million in retiree pension assets has disappeared and someone needs to pay it back. The $62 million that was lost is now owed by taxpayers and if the city does not pay it back by June 30, there is the very real potential of a massive inquiry covering the last several years of Providence administrations, actuaries and accountants. The result of the inquiry could be dozens of individuals being admonished, fined or incarcerated. Accounting fraud, and misleading municipal investors and bondholders are the most obvious charges. In addition to wire fraud, mail fraud, and theft charges, which are also possible. 

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So far, no Providence official has gone on the record regarding the missing $62 million. Finance Committee Chair Igliozzi and Mayor Elorza have been unavailable. Governor Raimondo won’t comment. And Treasurer Magaziner said something lame. 

What should be surprising to everyone is not the  ‘politician wall of silence” but the behavior of the victims of this theft aka  the unions . Paul Doughty, the union head for local 799  who said “it was an accounting change” and that “he wasn’t concerned." Fellow union members across the nation may differ. According to the website “ Local 799 is proud to be one of the oldest and largest locals in the International Association of Fire Fighters, AFL-CIO-CLC. “ I don’t think other locals would be so calm. We don’t even know if the rank and file have been told yet.

Given the general lies about funding the Providence Pension Plans by city officials over the last 20 years or so, I expected Doughty to demand an immediate investigation or even commence a lawsuit, as is so often the result of even small pension disputes. In fact in 2013 he supported the firing of the 90-year actuary Buck Consultants over a $700,000 dollar error. Curiously though now he state’s he’s unconcerned. Click here to see other AFL CIO locals suing regularly. The elephant in the room is “Why hasn’t anyone investigated how this happened in Providence?”

While no one in Rhode Island should be surprised that insiders are attempting to hide the truth or that the perpetrators could be both heads of unions and elected officials committing crimes together, we should be surprised and disgusted that our media doesn’t have the brains or guts to ask tough questions.

Members of Local 799 should ask tough questions of Doughty as to how this could happen and what he is doing to get the money back. On June 30 the Providence pension assets will be restated $62 million dollars lower. You should be very concerned.

As Wimpy said “I’ll gladly pay you Tuesday for a Hamburger today." Providence has committed fraud and screwed the Pension Plan and a dozen City officials have presented and signed off on misleading financials.

Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity, and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.