Aug. 7 (Bloomberg) -- Part-time work for the New Jersey towns of Leonia, Saddle Brook and Elmwood Park helped attorney Brian Giblin rack up pension credits worth $33,143 a year, even after a 2007 state law made contractors like him ineligible.
Giblin was among five attorneys singled out in a July 17 audit by Comptroller Matthew Boxer that found 202 people improperly enrolled in the state pension system. The potential cost of retirement payments to those attorneys, engineers and other professionals is at least $1.9 million annually, Boxer said, and probably much more because his office surveyed only 159 of New Jersey’s more than 1,000 towns and school districts.
The audit suggests that New Jersey has more work to do to end pension-system abuses that have contributed to it having $42 billion less in assets than needed to cover promised benefits. Lawmakers banned professionals from the system five years ago after a task force declared the rolls rife with “non-deserving” and “politically well-connected” people. The state has done little to enforce the law.
“Every quarter we’re required to send reports to the pension system,” Karen Chamberlain, Saddle Brook’s mayor, said in a July 27 telephone interview. “They should have been able to pick it up and say, ‘OK, Saddle Brook, here’s a person who’s not supposed to be in, and what are you going to do about it?”
New Jersey’s pension deficit reached $53.9 billion in 2010 after the state expanded benefits and skipped payments over a decade. The gap fell to $36.3 billion after Governor Chris Christie signed bills in 2011 that boosted employee pension and health-care contributions, raised the minimum retirement age for new workers and froze cost-of-living adjustments.
The unfunded liability swelled to $41.8 billion by June 2011 after Christie, a Republican, skipped a $3 billion pension payment. The deficit would have been more than $61 billion without his benefits overhaul, the state treasury estimated. Christie’s budget for this fiscal year included a $1.03 billion payment under a 2010 law that requires the state to phase in full contributions over seven years.
Saddle Brook, 8 miles (13 kilometers) west of New York City with a median household income of about $83,000, pays Giblin $6,516 a year to be its municipal prosecutor. He also is borough attorney in Elmwood Park and Leonia, with annual compensation from those towns of $128,840. All three towns were giving him credits toward a pension, Boxer’s audit found.
Giblin, 56, who lives in Paramus, declined to comment when reached by telephone the day Boxer’s audit was released, saying he hadn’t seen it. He didn’t respond to subsequent messages left at his Oradell private law firm. A reporter who visited the office yesterday seeking comment was told he wasn’t there.
Elmwood Park had conflicting opinions on Giblin’s pension eligibility from the state and the Internal Revenue Service, and left him enrolled for fear of a lawsuit, according to Keith Kazmark, the municipal clerk. Elmwood Park, like Saddle Brook, asked that Giblin be dropped after Boxer’s report.
“All we were looking for was a simple yes-or-no answer from the state of New Jersey, and unfortunately that did not come until the Boxer report was released,” Kazmark said by telephone. “It was never the intention of the administration to leave Mr. Giblin in there because of a political consideration or anything of that nature.”
On the Job
Leonia keeps Giblin enrolled for pension credits based on a 2007 opinion from the state Department of Community Affairs, said Myrna Becker, the borough’s chief financial officer.
“The information given to us was so long as he’s been in the pension system and we consider him an employee, he can stay in,” Becker said by telephone Aug. 2.
Community Affairs was “not aware of any advice that would have been given” to Leonia, Tammori Petty, a department spokeswoman, said in an Aug. 2 e-mail. “It is irrelevant when someone was put on the payroll.”
Boxer’s report said Community Affairs and the state Division of Pension and Benefits informed towns about the law in 2007 and 2008, referred to three IRS publications and offered training. Some towns insisted their professionals were “grandfathered” into the system. In fact, the law left pension credits intact if they were earned prior to Jan. 1, 2008, and made no exceptions beyond that cutoff.
The pensions division has put “limited resources” toward examining whether contractors are improperly enrolled in the Public Employees’ Retirement System, Boxer said. It has only one investigator for that task who works the cases part time, with minimal help from two other staffers and only in response to tips or media reports, Boxer’s report found.
“The number of questionable PERS enrollees we have identified, along with the other findings of this report, suggest that the time has come to allocate additional resources to this effort, at least on a temporary basis,” Boxer said.
Boxer pointed to New York’s success in addressing similar instances of pension abuse. That state’s comptroller, which unlike New Jersey is administrator of the pension system, recently established a 10-person “pension integrity bureau.” Three employees have the sole task of reviewing whether people are rightly part of the system, and more than 30 enrollees have been found to have received improper credits, Boxer said.
New Jersey’s pensions division is part of the state Treasury Department. Andy Pratt, a spokesman for Treasurer Andrew Sidamon-Eristoff, said the division is reviewing the 202 cases identified by Boxer and will then search for other such enrollees. As a result of the report, “a number of employers” have forwarded the names of contractors to drop, Pratt said in an e-mail.
“Refunds where appropriate will be given to individuals,” Pratt said. “Local governments do not get refunds if they wrongly certify that an employee is eligible.”
The division isn’t aware of any improper payouts made to contractors, Pratt said. Pension applications are reviewed and information confirmed before any checks go out, he said.
Giblin and four other contractors were identified as Attorneys 1 through 5 in the report. Their names were confirmed by Pete McAleer, a spokesman for Boxer’s office.
In addition to Giblin, three of the attorneys didn’t respond to messages left at their private practices: Charles Wigginton in Gloucester City, Timothy Higgins in Cherry Hill, and Joseph Trapanese in Little Falls.
Trapanese told the comptroller’s office that he had previously contacted the pensions division to ask whether he was an employee or a contractor, and didn’t receive a response. He applied for retirement benefits in May and his estimated annual pension benefit was $4,829, according to Boxer’s report.
Pratt said Trapanese was advised by the pensions division that his service after 2007 wouldn’t be credited. He retired in June and is receiving a pension of $2,252 a year based on his 66 months of service prior to the law, according to Pratt. The division refunded Trapanese $6,166 in June for his ineligible contributions, Pratt said.
John Schettino, identified as Attorney 1 in Boxer’s report, is paid a combined $241,654 a year by the borough of Fairview and the Guttenberg school board, and enrolled for pension credits in both. His 22 years of service would provide $97,196 annually if he retired now. When the 2008 cutoff is applied, the amount drops to $67,776.
Schettino, 52, a Harrington Park resident with law offices in Hackensack, said private attorneys in New Jersey can make three times the pay of their publicly employed counterparts, who were typically offered pensions to lessen that wage gap.
“When many of these professionals took these jobs, that was certainly a carrot,” he said in an Aug. 2 phone interview. “I imagine at the very least that hourly rates will go up because they’re no longer getting that benefit of being in a pension.”
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