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Cypen & Cypen
JUNE 18, 2004

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


In December 1994, Netting was diagnosed with cancer. At the time, he and his wife were trying to have a child. Because doctors advised Netting that chemotherapy might render him sterile, he delayed start of his treatment for several days so that he could deposit his semen, to be frozen and stored for later use by his wife. Prior to his death less than two months later, Netting confirmed that he wanted his wife to have their child after his death using his frozen sperm. Through in-vitro fertilization Netting’s wife gave birth to twins. Almost immediately, Netting’s wife filed an application on behalf of the children for Social Security Child’s Insurance benefits based on Netting’s earnings. The Social Security Administration denied the claim, which denial was upheld by an Administrative Law Judge. The ALJ held that the children were disentitled to benefits because they were not dependent on Netting at time of his death. By definition, he ruled, children conceived after a wage earner’s death cannot be deemed dependent on the wage earner. The mother filed suit in United States District Court, challenging the ruling against her children. The district judge agreed with that ruling and even expanded it: not only were the children nondependents at time of their father’s death, they were not even “children” under the Social Security Act! On appeal, the United States Court of Appeals reversed: (1) the children are Netting’s natural, biological children and (2) as legitimate children, they are statutorily deemed to be dependent on the insured wage earner. Gillett-Netting v. Barnhart, Case No. 03-15442 (U.S. 9th Cir., June 9, 2004).


Following the City of Atlanta’s internal pension audit released earlier this year (see C&C Newsletter for May 26, 2004, Item 3), authorities have found more instances of possible illegal payments from the City’s pension systems, as part of an investigation of lax record-keeping that involved checks written to dead people. According to the Atlanta Journal-Constitution, the Atlanta law department has referred five more cases of fraud to county prosecutors. All of the incidents involve pensioners who are dead and somebody continued to collect money fraudulently. Specifically, one case involves a husband and wife who continued to receive cash pension checks after the parent of one of them retired from the city and then died. Cases will be presented to a grand jury within the next few weeks. However, there is also some relatively good news: (1) three of the 454 pensioners thought to be dead were alive and (2) the audit incorrectly said money had been paid to dead people for a longer period than was actually the case -- meaning less than $2.1 Million had been overpaid. Gee, that’s great.


A white police officer applicant lacks standing to challenge city’s hiring procedures, imposed by federal consent decree, under which hires from eligible list alternate between minority and non-minority candidates, as law now disqualifies applicants, like plaintiff, who have reached age thirty-two upon taking qualifying exam. (In 2000, the Massachusetts Legislature adopted a statute providing that in any municipality adopting the law, no person who has reached the age of thirty-two on the date of entrance examination shall be eligible to have his name certified for “original appointment” to a municipal police officer position. The City of Boston adopted the provisions of that law.) The age restriction does not violate Equal Protection, because age is not a suspect classification, and the age limit has not been shown to be rationally unrelated to a legitimate state interest, such as assurance of physical fitness or reduced strain on the department’s pension system. Donahue v. City of Boston, Case No. 03-2227 (U.S. 1st Cir., June 8, 2004).


We learn from that California Public Employees’ Retirement System will ask its investment advisers details of their companies, as part of an effort to head off possible ethical violations. CalPERS is developing a form to find out more about financial relationship of its consulting firms with money managers. Specifically, a consultant would be required to report the percentage of revenue it and its parent company receives from money managers, brokerage activity, tax-exempt institutional investors and high net worth individuals. CalPERS also wants to know whether consultants receive noncash benefits or other perks from money managers in return for providing consulting or other services, including software, conferences and access to research data bases. Considering the Securities and Exchange Commission’s probe of pension consultants, local pension boards might consider following CalPERS’s lead.

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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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