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Miami

Cypen & Cypen
NEWSLETTER
for
MARCH 6, 2008

Stephen H. Cypen, Esq., Editor

1. FLORIDA APPELLATE COURT UPHOLDS PENSION FORFEITURE:

Hames was a City of Miami police officer, who, while on duty, shot and killed a suspect. Other officers planted a weapon on the suspect’s body to explain Hames’s actions and validate the shooting. Hames gave a sworn statement to homicide investigators wherein he covered up the actions of the other officers by falsely stating that the fleeing suspect was carrying a weapon before he was shot. Hames retired from the police force and began receiving full benefits from City of Miami Firefighters’ and Police Officers’ Trust. After the FBI began an investigation and Hames was charged with conspiracy to obstruct justice and deprive Miami’s citizens of rights, privileges and immunities in violation of federal law, Hames entered a guilty plea, admitting that he gave a false and misleading sworn statement regarding circumstances surrounding the shooting. The Trust held a hearing, and issued a final forfeiture order discontinuing Hames’s benefits and ordering return of money he had received in excess of his own contributions. On appeal, Hames argued that the Trust’s forfeiture order was improperly entered because: (1) the Trust lacked statutory authority independently to commence forfeiture proceedings; (2) the forfeiture proceedings commenced after the applicable statute of limitations had run; (3) Hames’s federal convictions were not “specified offenses” for purposes of the forfeiture statute; and (4) the administrative procedures employed by the Trust violated Hames’s due process rights. In a 14-page unanimous decision, the Third District Court of Appeal disagreed with all of Hames’s arguments. In Florida, Section 112.3173, Florida Statutes, provides that a retired police officer forfeits all rights to receive public retirement benefits in excess of his accumulated contributions if he is convicted of a “specified offense” committed prior to retirement. Section 112.3173(5), Florida Statutes, outlines the procedures used to determine whether the retired officer was “convicted” of a “specified offense” prior to retirement, thereby requiring forfeiture. The Trust was authorized to commence the instant forfeiture proceedings without filing a sworn complaint with Florida’s Commission on Ethics. The Trust’s obligation to conduct a forfeiture determination is triggered when it receives notice from the Commission on Ethics or otherwise has reason to believe that the rights and privileges of any person under the system are required to be forfeited. The five-year statute of limitations under Section 112.3231(1), Florida Statutes, for filing a complaint that alleges breach of the public trust within jurisdiction of the Commission on Ethics is not applicable. The four-year statute of limitations in Section 95.11(3)(n), Florida Statutes, does not apply either, because Florida courts have been loath to apply that section to penal or quasi-criminal actions -- similar to the disciplinary action in the case at bar. Hames’s conduct constituted official misconduct under Section 839.25, Florida Statutes. Hames admitted to committing the overt act of giving a false, sworn statement to investigators to hide actions of his fellow officers from eyes of the law. The Trust found that those actions amounted to official misconduct, and were punishable (at time of commission) under Section 839.25, Florida Statutes. Thus, Hames’s acts amounted to a breach of the public trust in violation of a “specified offense” requiring forfeiture of Hames’s retirement benefits. Prior to the Trust’s forfeiture determination hearing, Hames requested that the Trust execute subpoenas compelling attendance of two FBI agents to offer their testimony. The Trust executed and served legally valid and sufficient subpoenas as required by Hames. Subsequently, Hames was notified that the FBI witnesses could not appear at the hearing until the Department of Justice was provided with a certain affidavit. Failure to procure presence of the FBI witnesses was due to Hames’s own failure to comply with federal regulations after receiving notice that the two FBI witnesses would not appear; to seek a continuance of the hearing to allow more time to comply; or to petition the circuit court for enforcement of the subpoenas. Besides, Hames failed to proffer what the FBI witnesses would have said and what effect their testimony may have had on the proceedings. The administrative procedures employed by the Trust during Hames’s administrative forfeiture determination were sufficient for due process purposes. We were honored to have served as co-counsel to the Trust, one of our regular clients. Hames v. The City of Miami Firefighters’ and Police Officers’ Trust, Case No. 3D07-186 (Fla. 3d DCA, March 05, 2008).

2. CCR RELEASES NEW WORKING PAPERS:

The Center for Retirement Research at Boston College has released several interesting Working Papers. They are as follows:

1. How Many Struggle to get by in Retirement?

2. How the Income Tax Treatment of Saving and Social Security Benefits May Affect Boomers’ Retirement Incomes.

3. Do Out-of-Pocket Health Care Costs Delay Retirement?

4. The Implications of Career Lengths for Social Security.

5. The Trajectory of Wealth in Retirement.

6. Participant Perceptions and Decision-Making Concerning Retirement Benefits.

All are accessible through the Center’s website at http://www.bc.edu/crr.

3. WHAT DO WE KNOW ABOUT THE UNIVERSE OF STATE AND LOCAL PLANS?:

Speaking of Center for Retirement Research at Boston College, CCR has released a new Issue in Brief, entitled “What Do We Know About the Universe of State and Local Plans?” Several surveys report data on public pension plans, but they tend to focus on the 120 major state systems and some include a sampling of locally-administered plans. The Census of Governments is the only source that reports on the entire universe of state-administered plans, in addition to the more than 2,000 locally-administered plans. The Brief describes that population, reports on investment performance of different types of public plans and compares investment performance of public and private plans. Comparing returns of public and private plans produced no significant differences once plan size and asset composition were taken into account. The drawback of Census data is that they include no information on liabilities, so it is impossible to draw any conclusions about funding behavior. The Census would be substantially more valuable if it included such information. Funding, however, remains important, and future Briefs will address funding questions using survey data. Some of the Brief’s key findings from U.S. Census data are

  • State-administered retirement plans account for only 8% of total plans, but 88% of active members and 82% of assets.
  • Local plans have more assets per worker, probably because they often cover police and firefighters.
  • Unadjusted returns in public plans are higher than private plans because they are larger and invest more of their assets in equities.

The Brief is at http://ccr.bc.edu/images/Stories/Briefs/slp_4.pdf.

4. TALLAHASSEE DEMOCRAT GETS IT RIGHT:

Folks at Tallahassee Democrat say that the outrage against so-called double-dipping just does not add up. And they are right. Responding to reports about the Florida Retirement System’s Deferred Retirement Option Plan, Governor Charlie Crist said the problem of big shots drawing fat pensions, but not going away, is something that needs to be looked at. Many also received large payouts from the DROP on top of their pensions and salaries. The St. Petersburg Times (who else?) had a riveting report about hundreds of public officials gaming the system. Although the numbers look alarming, there is a big logical flaw in any possible solution. Take Supreme Court Justice Harry Lee Anstead, for instance. The Times reported that he got over $400,000 in deferred compensation when he “retired,” draws a pension of more than $7,500 a month and earns $160,000 as a member of Florida’s highest court. Do you have any idea how much the taxpayers could save if he were not doing all of that? Well, rounded off to the nearest dollar, nothing! The accumulated retirement benefits belong to him. The state could not refuse to give him his money, sooner or later. If Anstead went into private practice, took to his rocking chair with a good book or otherwise abdicated his supremacy, he would still have his pension. Someone else would be getting the Justice’s salary. So where’s the beef? The DROP is good for the state as well as for the employee. If an employee leaves, his boss has to justify keeping his vacant position in the budget, advertise the opening and find a replacement, who may or may not be as good. For sure, the agency will have to train-up a successor for awhile. Why not give that employee his pension and get him to stay? To ask the question is to answer it. Let’s get one thing straight: receiving a pension (which you have earned) and being paid a salary (which you are earning) are not in any way inappropriate. Double-dipping, on the other hand, applies only when one receives double credit for the same time period. Let’s stop bashing the good employees of Florida, especially the 7,700 “regular” ones in the FRS DROP.

5. POP GOES THE WEASEL:

A state governmental employee benefit plan sought an IRS ruling that amendments proposed by a state legislature to eliminate “pop-up” and “pop-down” rights (now, there’s a new one) under which retirees were entitled to elect to change from a joint and survivor annuity option to a single life annuity would not cause the system to lose grandfathering provisions for government plans and relevant regulations under IRC Section 401(a)(9). In a recent Private Letter Ruling, Internal Revenue Service first ruled that the legislative amendment complied with the conditions and rules in such regulations. Second, as to the “pop-up” and “pop-down” provisions, it held that the amendments comply with the applicable regulations and that limiting such elections by future employees to only the two events described in the regulations would not cause the system to lose the special grandfathering provisions applicable to such plans and contained in the regulations. PLR 200807023 (November 20, 2007).

6. IRS INTEREST RATES DROP FOR SECOND QUARTER OF 2008:

Internal Revenue Service has announced that interest rates for calendar quarter beginning April 1, 2008 will drop by one percentage point. The new rates will be

  • six percent for overpayments (five percent in case of a corporation);
  • six percent for underpayments;
  • eight percent for large corporate underpayments; and
  • three and one-half percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus three percentage points. Generally, in case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points and the overpayment rate is the federal short-term rate plus two percentage points. IR-2008-030 (March 3, 2008).

7. BUFFET REBUFFS DIVERSIFICATION?:

Fiduciary Investor asks whether fiduciaries should invest like Warren Buffet. Most people know the duty to act prudently is one of a fiduciary’s primary responsibilities under ERISA. However, with this fiduciary responsibility also comes potential liability. Fiduciaries who do not adhere to the basic standards of prudent fiduciary conduct may be organizationally and personally liable for plan losses. Fulfilling these responsibilities requires expertise, particularly in an area such as investments. Lacking expertise, a fiduciary should employ professional investment strategies. In a recent interview with students at Emory University, Warren Buffet remarked on investing and the value of diversification:

If investing is your game, diversification doesn’t make sense. It’s crazy to put money into your 20th choice rather than your 1st choice. If you have a harem of 40 women, you never really get to know any of them well. Charlie (Munger) and I operated mostly with 5 positions. If I were running 50, 100, 200 million, I would have 80% in 5 positions, with 25% for the largest. ...

Over the past 50-60 years, Charlie and I have never permanently lost more than 2% of our personal net worth on a position. We’ve suffered quotational loss, 50% movements. That’s why you should never borrow money. We don’t want to get into situations where anyone can pull the rug out from under our feet. ...

If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.

Despite his extraordinary success, fiduciaries would have to think long and hard about their exposure before singularly employing Warren Buffet’s unique investing strategies. Could following the Oracle of Omaha’s advice constitute a legal defense to claims of fiduciary breach?

8. GAO REPORT ON HEDGE FUNDS:

The United States Government Accountability Office has issued a report to Congressional Requesters, entitled “HEDGE FUNDS Regulators and Market Participants Are Taking Steps to Strengthen Market Discipline, but Continued Attention is Needed.” Since the 1998 near collapse of Long-Term Capital Management, a large hedge fund, the number of hedge funds has grown, and they have attracted investments from institutional investors like pension plans. (A hedge fund is a pooled investment vehicle that is privately managed and often engages in active trading of various types of securities and commodity futures and options.) Hedge funds generally are recognized as important sources of liquidity and as holders and managers of risks in capital markets. Although the market impacts of recent hedge fund collapses were less severe than that of LTCM, they recalled concerns about risks associated with hedge funds and highlighted the continuing relevance of questions raised over LTCM. GAO’s report (1) describes how federal financial regulators oversee hedge fund-related activities under their existing authority; (2) examines what measures investors, creditors and counterparties have taken to impose market discipline on hedge funds; and (3) explores potential for systemic risk from hedge fund-related activities and describes actions regulators have taken to address this risk. In conducting its study, GAO reviewed regulators’ policy documents, examinations and industry reports, and interviewed regulatory and industry officials and academics. GAO-08-200 (January 2008).

9. 9TH ANNUAL TRANSAMERICA RETIREMENT SURVEY:

Transamerica Center for Retirement Studies has published its 9th Annual Retirement Survey (Workforce). Here are parts of the Executive Summary:

  • Full-time workers indicate the lowest level of retirement confidence since 2004 in being able fully to retire with a lifestyle they consider as comfortable. Workers with a higher household income are more confident than those with a lower household income. Women are less confident than men that they will be able fully to retire with a comfortable lifestyle.
  • In 2007, less than half of respondents agree they are building a large enough retirement nest egg.
  • Only the wealthy and highly educated workers most frequently mention saving for retirement as their highest priority. The majority of workers cite paying off debt and covering basic living expenses as their primary financial goals.
  • Full-time female workers are much more likely than their male counterparts to cite being already stretched financially as the factor most preventing them from saving more for retirement.
  • The percentage of full-time workers taking a loan from their retirement plan has increased.
  • Healthcare is seen as a key priority while working and during retirement.
  • Slightly more than half of all workers have a retirement strategy; however, very few workers write the strategy down (duh).
  • Only a small percentage of workers feel they have a good understanding of asset allocation principles as they relate to retirement investing.
  • One other thing we learned from the study -- the following definitions about which we had never thought before:
  • Mature - born before 1946.
  • Baby Boomer - born between 1946 and 1964.
  • Generation Xer - born between 1965 and 1978.
  • Echo Boomer - born between 1979 and 1989.

Repeat that, please.

10. WITNESSES IN POLICE DISCIPLINARY HEARINGS HAVE ABSOLUTE IMMUNITY:

A recent federal appeal concerned whether a police chief, as a witness testifying at police disciplinary hearings, is absolutely immune from civil liability for offering allegedly perjurious testimony at those hearings. A police officer in the town also alleged that another police officer falsely accused him of misconduct and caused him to suffer humiliation and economic loss. The appellate court affirmed the district court’s dismissal of the claims against both the chief and the other officer on the ground that the chief is absolutely immune from civil suit based on his testimony at the disciplinary hearings, and on the ground that the complaining officer failed to state a constitutionally cognizable deprivation of liberty or property rights as a result of the other officer’s alleged false accusations. Among other things, the officer claimed economic loss for denial of overtime pay, but demonstrated no rules or understandings that proved he had a legitimate claim to overtime. Rolon v. Henneman, Case No. 06-3890 (U.S. 2d Cir., February 25, 2008).

11. CITY IN FLORIDA MAY NOT ADOPT ORDINANCE BANNING RIDERS IN BEDS OF TRUCKS WITHOUT PROPER RESTRAINTS:

Chapter 316, Florida Statutes, the Florida Uniform Traffic Control Law, was adopted to make uniform traffic laws apply throughout the state and its several counties and uniform traffic ordinances to apply in all municipalities. While the chapter was enacted to eliminate the “hodge podge” of ordinances that vary as to language and penalty, there are instances where the Legislature has recognized that municipalities may control traffic movement or parking. The statute provides, however, that it is unlawful for any local authority to pass or to attempt to enforce any ordinance in conflict with the provisions of Chapter 316, Florida Statutes. Thus, the Florida Attorney General has previously concluded that, absent express authorization under the Uniform Traffic Control Law, Chapter 316 constitutes a prohibition on local legislation on the subjects of traffic control and enforcement. It is unlawful for any operator of a pickup truck or flatbed truck to permit a minor child who has not attained 18 years of age to ride upon limited access facilities of the state within the open body of a pickup truck or flatbed truck unless the minor is restrained within the open body in the back of a truck that has been modified to include secure seating and safety restraints to prevent the passenger from being thrown, falling or jumping from the truck. No other provision of the Uniform Traffic Control Law otherwise requires persons 18 years of age or older to wear safety restraints when riding in the open body of a pickup truck or a flatbed truck. Given that the Legislature has addressed the use of seat belts and safety restraints, as well as circumstances under which persons must be restrained in riding in the open body of a pickup truck or flatbed truck, the Florida Attorney General held that the Uniform Traffic Control Law preempts local legislation on the subject. Therefore, a Florida city may not adopt an ordinance banning riders in beds of pickup trucks or flatbed trucks without proper restraints. AGO 2008-11 (February 29, 2008).

12. TO AVOID PROHIBITED DUAL OFFICE-HOLDING, ONE MUST RESIGN FROM FIRST OFFICE PRIOR TO ASSUMING SECOND OFFICE:

A Florida city held general elections on January 29, 2008. A candidate who sits on the city’s planning and zoning commission ran unopposed for an open seat on the city council. However, the individual will not begin to serve on the city council until he is sworn in on April 23, 2008, at which time he will begin to serve his three-year term. The Florida Attorney General was asked whether such individual was required to resign before the election (as he was unopposed), once elected or when he is sworn into office as a city council member. As our readers know, Article II, Section 5(a) of the Florida Constitution, generally prohibits dual office-holding. However, here, the individual will not assume duties as a member of the city council until April 23, 2008. Thus, it cannot be said that prior to such date the individual is, in fact, simultaneously serving in two offices. Hence, the Attorney General logically held that the individual must resign prior to assuming office on April 23, 2008, at which time he will be sworn in and his city council term will begin. AGO 2008-10 (February 28, 2008).

13. CITY MAY ALLOW ELECTED OFFICIALS TO OPT OUT OF GROUP HEALTH INSURANCE PLAN AND RECEIVE COMPENSATION THEREFOR:

A city provides health insurance coverage for its elected officers and its full-time employees. The city wishes to allow its elected officials to opt out of the group insurance plan, and, in lieu thereof, receive compensation in the amount of the unused premium. The city may also wish to extend the option to all full-time employees. Section 112.08(2), Florida Statutes, specifically recognizes authority of a municipality to pay premiums to provide insurance for its officers and employees. The statute, however, does not address payment of money directly to the officer or employee in lieu of the premium payment, should the officer or employee otherwise have insurance coverage. Thus, absent a statutory prohibition, it is the governing body of the city that must make a determination that such payments serve a municipal purpose, and act accordingly under its broad constitutional grant of home rule powers. Accordingly, the Florida Attorney General held that a city may allow its elected officials and its employees to opt out of the city’s group health insurance plan, and, in lieu thereof, receive compensation in the amount of the unused premium. Absent a limitation in the city’s charter or personnel rules, the city may allow only elected officials to participate in the optional program. (Gee, that’s real fair.) AGO 2008-09 (February 26, 2008).

14. CITY COUNCIL MEMBER SERVING AS WEBMASTER OF A PRIVATELY-OWNED AND OPERATED INTERNET WEBSITE:

A newly elected city council member is a webmaster and regular contributor to an internet website that serves as a public forum for citizen discussion and debate on issues likely to come before the city council for official action. The website is not affiliated with the city. Another recently elected council member is a regular contributor to the website,. The webmaster’s duties include screening submitted materials for vulgarity and offensive comments, then posting the materials on the website. The webmaster uses an e-mail address separate from the one used for official city business. Primarily, the city is unsure of Government in the Sunshine Law implications for postings among city council members on issues upon which foreseeable action will be taken by the city council. In answering questions from the city attorney, the Florida Attorney General recognized that the public official with control over the records is the city council member who creates and posts comments on the website. Since the records are public records because they are related to transaction of city business, such records would appear to be subject to the city’s policies and retention schedule regarding city records. While the webmaster administering the website is a city council member, the city has no ownership, control or affiliation with the website. Therefore, it would appear that the individual council members who create the public documents through the posted comments and e-mails would be responsible for ensuring that the information is maintained in accordance with the public records law and the policies and retention schedule adopted by the city. Why does everything have to be so complicated? AGO 2008-07 (February 26, 2008).

15. “NO WAY ON EARTH” LAWYER GETS REQUESTED FEE:

The Recorder reports on the case of Michael Harrington, a police officer who lost out on $44.63 in overtime pay for an off-duty detail. He sued and later settled for $10,000 (!), and sought $46,000 in attorneys’ fees. The trial judge rejected the outlandish fee request, and on appeal, the denial was upheld. In fixing the fee at $500, the appellate court said “at the risk of understatement, there is No Way on Earth this case justified the hours purportedly billed by Harrington’s lawyers.” As lawyers, we feel obligated to point out those instances in which members of our profession do the wrong thing. Let’s face it, Folks: 99% of lawyers give the rest of us a bad reputation.

16. SO, HOW’S WORK?:

Money asks whether your hard-working colleagues are as happy as they seem. Well, only 47% of Americans are satisfied with their jobs, but 52% of those working 50 to 60 hours a week are satisfied. (Huh?) Firefighters and clergy are happiest in their jobs. In a survey, 95% of bosses thought their jokes were “really, really funny,” but only 3% of employees agreed. (But, we’ll bet, they laughed hysterically.) Two-thirds of bosses said morale was excellent or great; 51% of employees agreed. American workers receive an average of 14 days paid vacation a year, but take only 11. And nearly a quarter check work e-mail or voice mail while on vacation. Maybe Europe has the right idea.

17. QUOTE OF THE WEEK:

“I don’t want any yes-men around me. I want everybody to tell me the truth even if it costs them their jobs.” Samuel Goldwyn


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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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