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Cypen & Cypen
FEBRUARY 2, 2006

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


On December 5, 2005, Lori Richards, Director, Office of Compliance Inspections and Examinations, U.S. Securities and Exchange Commission, spoke to the 14th Annual Public Fund Boards Forum. Ms. Richards was presenting an update on SEC’s examinations of conflicts of interest in pension consulting. Of course, Ms. Richards made reference to the “Staff Report Concerning Examinations of Select Pension Consultants” dated May 16, 2005 (see C&C Newsletter for May 19, 2005, Item 1) and “Selecting and Monitoring Pension Consultants - Tips for Plan Fiduciaries” dated June 1, 2005 (see C&C Newsletter for June 9, 2005, Item 1). In order to understand the context of Ms. Richards’s remarks, readers should review those pieces. Basically, here is what many pension consultants said they were doing in light of SEC’s three recommendations:

A. Insulating Advisory Activities - many pension consultants looked at the nature of their various activities, and considered policies that would insulate their pension consulting activities from other activities of the firm, including for example, creating separate reporting lines and firewalls between employees who perform these separate functions, and considering employee compensation and incentives.

B. Disclosing Conflict - most consultants have updated their policies and procedures to improve their disclosure of material conflicts of interest to pension plan clients and potential clients.

C. Implementing Policies and Procedures - pension consultants considered their policies and procedures to prevent conflicts of interest with respect to brokerage commissions, gifts, gratuities, entertainment, contributions, donations and other emoluments provided to clients or received by money managers.

As a matter of policy, SEC disclaims responsibility for any private statement by an employee. Thus, although the speaker’s views are her own and do not necessarily reflect those of SEC, they are insightful and informative. Read the entire speech at

2. NO LITIGATION -- NO “SHADE MEETING”: The Florida Attorney General was recently asked the following question:

May a closed attorney-client session be held pursuant to Section 286.011, Florida Statutes, to discuss settlement negotiations on an issue that is the subject of ongoing mediation pursuant to a partnership agreement between the Southwest Florida Water Management District and others?

Section 286.011(1), Florida Statutes, the Florida Sunshine Law, requires governmental boards or commissions to conduct their business at open public meetings. The Legislature, however, has created a limited exception for attorney-client discussions. Section 286.011(8), Florida Statutes, provides that notwithstanding the provisions of subsection (1) and provided the enumerated conditions are met, any board or commission and the chief administrator or executive officer of the entity may meet in private with the entity’s attorney to discuss pending litigation to which the entity is presently a party before a court or administrative agency. Here, the Water Management District and others were engaged in pre-litigation mediation, as part of a contractual dispute resolution process. Thus, the Attorney General concluded that a closed attorney-client session may not be held to discuss settlement negotiations on an issue that is the subject of ongoing mediation, where no litigation has been filed in court or before an administrative body. AGO 2006-03 (January 25, 2006).


As the Court held in Mintus v. City of West Palm Beach, 711 So.2d 1359 (Fla. 4th DCA 1998) (see C&C Newsletter for July, 1998, Page 4), Section 119.07(1)(a), Florida Statutes, provides that every person who has custody of a public record shall permit the record to be inspected and examined by any person desiring to do so, at any reasonable time, under reasonable conditions, and under supervision by the custodian of the public record or the custodian’s designee. The term “custodian” under the Public Records Act refers to agency personnel who have it within their control to release or communicate public records. In order to have custody, one must have supervision and control over the document or have legal responsibility for its care, keeping or guardianship. The Florida Attorney General was recently asked whether or not the Public Records Act imposes a responsibility on “public relations staff” or other employees of an agency to make a good faith effort to locate requested documents. The Attorney General found that the answer depends on whether such staff are the designated records custodian or have custody of the public records in accordance with the foregoing guidelines. Whether an individual is a records custodian or the custodian’s designee presents a mixed question of law and fact that the Attorney General’s Office cannot resolve. Resolution would necessarily turn on the policies and procedures of a particular agency. (Informal Attorney General Opinion, January 23, 2006).


Maine’s Governor’s plan to exempt military pensions from state income taxes is being sold as an economic benefit because it would attract retirees who have high work skills and few needs for government services. The exemption would apply to all of those in the military who retire after January 1, 2007. Most military retirees are skilled workers who do not have children in schools, and the federal government picks up their health care costs for life. Many have shown a dedication to public service that will likely continue in retirement. The tax break would only cost the state $94,000 in lost revenues the first year, but the second year would probably hit $300,000. (Currently, about 250 military people retire to Maine every year.) If all of Maine’s 12,000 retired military people did not pay taxes on their pensions, it would cost the state treasury between $8 Million and $9 Million a year. Nationally, more states are offering tax breaks on pension income. Twelve states now exempt military pensions from state income taxes: Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New Jersey, New York, Pennsylvania and Wisconsin. Of course, there are states (nine) that have no personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming; New Hampshire and Tennessee collect income taxes only on interest and dividend income. All this good stuff comes from


Timing is the most important weapon in an investor’s arsenal. Nothing comes close to it. So, start saving early. Here is an example of the power of time and compounding. John begins at age 25 to put $2,000 per year into a mutual fund. At age 35 he stops contributing. Jane also contributes $2,000 per year but starts at age 35 and does so for 30 years. How much will each of them have at age 65, assuming a 10% annual return? John, who contributed only $20,000, will have $556,000. Jane, who contributed $60,000, will have $349,000. If you are a young person, all you need to know is that you must start early. This basic tip comes from Kiplinger’s Personal Finance.


Since 1989, mergers (and scandals) have reduced the number of major accountancy firms from 8 to 4. Usually called the “Big 4,” some jokingly refer to them as the “Final 4.” And now a little trip down memory lane:

Big 8 (1970's - 1989):

1. Arthur Andersen
2. Arthur Young & Company
3. Coopers & Lybrand
4. Ernst & Whinney (formerly Ernst & Ernst)
5. Haskins & Sells (merged with European firm to become Deloitte, Haskins and Sells)
6. KPMG (formed by merger of Peat Marwick International and KMG Group)
7. Price Waterhouse
8. Touche Ross

Big 6 (1989-1998):

Ernst & Whinney merged with Arthur Young to form Ernst & Young and Deloitte, Haskins and Sells merged with Touche Ross to form Deloitte & Touche.

Big 5 (1998-2002):

Price Waterhouse merged with Coopers & Lybrand to form PricewaterhouseCoopers.

Big 4 (2002- ):

Arthur Andersen, smallest of the Big 5, collapses in wake of 2001 Enron scandal for falsifying financial statements. In order of revenue and headcount, the 4 largest accounting firms are:

1. PricewaterhouseCoopers
2. Deloitte Touche Tohmatsu
3. Ernst & Young

Incredibly, the Big 4 accounting firms audit 80% of all United States public companies! Any further contraction, could seriously shatter accounting sector and public confidence in the markets.

Copyright, 1996-2006, all rights reserved.

Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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