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Cypen & Cypen
June 21, 2012

Stephen H. Cypen, Esq., Editor

1.     PUBLIC PENSION PLAN NOT ELIGIBLE FOR RELIEF UNDER CHAPTER 11:      Based on the parties’ written submissions, and subject to oral argument and further reflection, a United States Bankruptcy Court Judge has tentatively ruled that the Northern Mariana Islands Retirement Fund is a “governmental unit,” which is not eligible for relief under chapter 11 of the Bankruptcy Code (see C&C Newsletter for May 10, 2012, Item 3).  Only a “person” may be a debtor in a chapter 11 case, and that term does not include a governmental unit.  The Fund is an instrumentality of the government of the Commonwealth of the Northern Mariana Islands.  The government formed the Fund as a means of carrying out its obligations to its current and retired employees.  Providing compensation and benefits to government employees is a quintessential governmental function, where government employees’ and retirees’ pension rights enjoy constitutional protection.  The Fund exists for the sole purpose of receiving money from the government, investing the money until it is needed and paying out the money to government employees and retirees in accordance with the law governing the relationship between the government and its employees.  The Fund does literally nothing other than carry out the government’s duties.  In re Northern Mariana Islands Retirement Fund, Case No. 12-00003 (Bankr. Mariana Islands, May 29, 2012). 
2.      BOSTON WILL HIKE RETIREES’ PENSIONS:     As cities and states across the nation take aim at public employee pensions, Boston City Hall is engaged in a very different debate:  how much to increase retirees’ checks. reports that Mayor Thomas Menino is proposing to boost the annual cost-of-living adjustment for most pensioners from $360 to $390, a $30 increase.  City Council president Stephen Murphy is pushing for more, seeking a $90 increase over the current rate.  Other Massachusetts cities and towns have had similar debates.  Last month in Brookline, voters rejected advice of the Board of Selectmen and approved a pension increase akin to what Menino is proposing in Boston.  In Hampden County, last year, the retirement board that covers 18 towns enlarged the annual COLA by $180.  Massachusetts county retirement boards covering almost 200 cities and towns have approved larger pension checks by increasing the yearly COLA.  One possible explanation:  unlike some public sector workers nationally, municipal retirees in Massachusetts are not eligible for Social Security.  By the way, the city has roughly 14,400 retirees, with an average annual pension of about $33,000 – in the neighborhood of 50% higher than the national and Florida annual average pension. 
3.      RECENTLY-AMENDED FLORIDA STATUTE VIOLATES NATIONAL VOTING RIGHTS ACT:      League of Women Voters of Florida and other organizations that have conducted voter-registration drives in the past and wish to continue to do so, challenged Florida Statutes Section 97.0575 (2011), and an implementing rule.  It moved for a preliminary injunction barring enforcement of the statute and rule.  A United States District Court judge in Florida granted the motion in part based on the following analysis.  Under the First and Fourteenth Amendments, an election-code provision of this kind must serve a legitimate purpose that is sufficient to warrant the burden it imposes on the right to vote.  Under the National Voting Rights Act, an organization has a federal right to conduct a voter-registration drive, collect voter-registration applications and mail in the applications to a state voter-registration office.  Section 97.0575 and the rule severely restrict an organization’s ability to accomplish this task.  The statute and rule impose a harsh and impractical 48-hour deadline for an organization to deliver applications to a voter-registration office, and effectively prohibit an organization from mailing in applications.  And the statute and rule impose burdensome record-keeping and reporting requirements that serve little if any purpose, thus rendering them unconstitutional even to the extent that they do not violate the NVRA.  Plaintiffs established the four requisites for obtaining a preliminary injunction:  (1) plaintiff must establish a substantial likelihood of success on the merits, (2) that it will suffer irreparable injury unless the injunction issues, (3) that the threatened injury outweighs whatever damage the proposed injunction may cause a defendant and (4) that the injunction will not be adverse to the public interest.  League of Women Voters of Florida v. Browning, Case No. 4:11cv628 (ND Fla. May 31, 2012). 
4.      FISCAL SURVEY OF STATES:     A report by the National Governors Association and the National Association of State Budget Officers presents an update of state fiscal conditions.  State fiscal conditions are continuing to improve into fiscal 2013, although many state budgets are not fully back to pre-recession levels.  Governors’ recommended budgets show an overall increase in both general fund expenditures and revenues in fiscal 2013.  However, fiscal 2013 general fund revenues are projected to increase by $27.4 Billion, or 4.1 percent, and additional recommended spending is only projected to increase by $14.6 Billion, or 2.2 percent, suggesting that states remain cautious about the strength of the national economic recovery.  Fiscal trends indicate that while aggregate state revenues will be above their pre-recession levels in fiscal 2013, total general fund spending will not yet surpass pre-recession levels. Consequently, state budgets reflect a national economy in which growth is slow and not as robust as in previous recoveries, yet overall state fiscal improvement is occurring.  Based upon most recent fiscal 2012 projections, 43 states expect higher or on-target revenues.  In Florida, fiscal 2012 tax collections compared with projections used in adopting its fiscal 2012 budget are pretty much on the mark. 
5.      CUSTODIAN NOT FIDUCIARY UNDER ERISA:     The United States Court of Appeals for the Sixth Circuit recently considered an appeal stemming from misconduct of an investment advisor who stole millions of dollars from the employee benefits plans that he managed. He and his company held the fiduciary accounts of the defrauded plans -- along with his personal accounts -- with Regions Bank. The investment advisor’s bankruptcy trustee and several former clients of the advisor alleged that Regions Bank negligently or knowingly allowed the advisor to steal from the fiduciary accounts held at Regions.  The Trustee sued Regions under the Employee Retirement Income Security Act.  The district court dismissed the Trustee’s ERISA claims.  On appeal by the Trustee, the appellate court affirmed.  For the most part, Regions Bank behaved like an ordinary depositary bank.  It facilitated withdrawals and transfers, received deposits for plan accounts and held plan assets.  Regions Bank also collected fees and analysis charges from the advisor’s accounts, although it did fail to comply with laws aimed at preventing money laundering.   McLemore v. Regions Bank, Case Nos. 10-5480 and 10-5491 (U.S. 6th Cir., June 8, 2012). 
6.      THE COST OF TRIGGER-HAPPY INVESTING:     Towers Watson discourages clients from being “trigger happy.”  Instead, Towers Watson usually counsels them to wait before firing an underperforming investment manager.  They do so because evidence and experience show that retaining an underperforming manager often proves more profitable than replacing it.  In a new paper, Towers Watson calculates the cost of being trigger happy by following two investors with different temperaments who hire the same active manager.  Towers Watson found that a disciplined investor profits from using an active manager, while a trigger-happy investor would fare better with an index fund.  Sure thing. 
7.      GENDER GAP IN FINANCIAL LITERACY:         Even though women make up the majority of college graduates and are increasingly making strides in the workforce, there is still a significant and growing gender gap when it comes to financial wellness.  A report from Financial Finesse says women lag men in many areas of financial planning, and they are significantly behind in two of the most critical areas: basic money management, which is the foundation for financial planning, and investing, which is a necessary skill to grow wealth over time.  This situation is of concern because given the fact that women actually have more financial challenges than men --namely, living on average 5 years longer and having to make retirement savings last over their longer life spans, higher healthcare expenses than men over the course of their lives and lower average monthly Social Security payments due to less time in the workforce (see C&C Newsletter for June 14, 2012, Item 9).  Ninety percent of women will be solely responsible for their finances at some point in their lives due to the death of a spouse or a divorce, yet women report much lower levels of financial knowledge and confidence than men.  Below are key trends around the gender gap in financial planning and financial literacy: 

  • Overall, the gap is widening, with women falling further behind in many key areas of financial planning, most notably money management and investing. 
  • Women’s confidence in their retirement preparedness has slipped, and they are still behind men in terms of how much they are saving for retirement, but the gender gap in retirement planning is smaller than most other areas, with virtually no gap between men and women with respect to participating in 401(k) plans or IRAs. 
  • In general, women are doing a better job at planning for longer term goals, and protecting their wealth, but having a harder time with basic money management skills and investing, both of which are more transactional in nature and often entail more hands-on management and quick decision making. 

:     According to a press release from U.S. Equal Employment Opportunity Commission, Nassau County, New York, will pay $65,000 to settle an age discrimination lawsuit brought by EEOC.  EEOC had charged Nassau County with discrimination against Jay Lieberfarb, a 71-year-old lifeguard with 50 years of experience.  The suit said that Nassau County first suspended Lieberfarb after he failed a swim test and then discharged him from his lifeguard position before he was given the chance to complete a retest.  Younger lifeguards, on the other hand, were not suspended or discharged and instead were permitted to continue working despite failing the same swim test.  Such alleged conduct violates the Age Discrimination in Employment Act.  The suit was filed after pre-litigation settlement talks failed.  In fairness to Lieberfarb, he should have been cut some slack:  after all, it is not easy to swim wearing Depends. 
9.      PROPERTY-TAX DELINQUENTS OWE PHILADELPHIA HALF-A-BILLION BUCKS:     Philadelphia property-tax delinquents piled up an additional $43.8 Million in new debt over the last year, increasing the total amount owed to the city to $515.4 Million, an increase of 9.3 percent in a single year. reports that there are now about 103,000 tax-delinquent properties in Philadelphia, about 18 percent of the total in the city.  No other big city in the nation approaches that level of property-tax delinquency.  Past-due property taxes have long been a contentious issue in Philadelphia, but the growing pot of delinquent cash has attracted more attention than usual in recent months.  The reason is a proposed citywide property reassessment that would collect an additional $94 Million (collect or levy?).  Meanwhile, the School District of Philadelphia, which relies on property taxes for 80 percent of its local funding, is in midst of perhaps the worst financial crisis in its history.  The Revenue Commissioner said his department is not insensitive to shortcomings of the present real estate tax-collection system, and has taken steps to improve that system. 
10.    LAWMAKER BARRED FROM SPEAKING AFTER ANATOMICAL COMMENT:     Michigan House Republicans prohibited state Rep. Lisa Brown from speaking on the floor after she ended a speech against a bill restricting abortions by referencing her female anatomy.  Brown, a Democrat and mother of three, said a package of abortion regulation bills would violate her Jewish beliefs, and that an abortion should be allowed in cases where it is required to save the life of the mother.  “Finally, Mr. Speaker, I’m flattered that you’re all so interested in my vagina, but ‘no’ means ‘no.’”  Brown’s comment prompted a rebuke by House Republicans, who would not allow her to voice her opinion on a school employee retirement bill, reports  To quote one Republican representative, “It was so offensive … I would not say that in mixed company.”  Good grief. 
11.    APPLICANTS DO THE DARNDEST THINGS: has released “Applicants Do the Darndest Things:  how HR can spot candidates who game the system.”  Here is a roadmap for spotting deception in job applicants: 

  • Job candidate provides a false date of birth with intention of throwing off a criminal record search.  Ask for a legal form of identification, such as a driver’s license or passport that you can then compare to the information he has provided you on the background check release.  
  • Job candidate provides a false Social Security number with intention of hiding places where he has lived.  Make sure the candidate provides a valid form of identification that confirms the Social Security number. 
  • Applicant provides you with a false Social Security number to prove that he has the legal right to work in this country.  All employers have the responsibility of collecting a completed I-9 form from employees within the first three days of work.  
  • Candidate intentionally omits a past employer from job application.  Compare the resume to the completed job application before it is submitted for background check; make sure you inquire about specific starting and ending dates of employment when conducting an employment verification. 
  • Applicant claims to work for an employer that does not exist.  If you have not heard of the company, Google it.  If the information still cannot be confirmed, ask the applicant to provide you with his W-2s.  
  • Candidate presents a fake copy of his diploma when degree could not be verified.  The best way to determine academic qualifications is to make an inquiry with the academic institution’s registrar’s office. 
  • Candidate waits several days to take a drug test.  Protect against this tactic by instructing your screening provider to prohibit an applicant from taking a test if he has shown up after a prescribed amount of time (no more than 48 hours, for example). 
  • Applicant claims to have worked for a company that went out of business, knowing you will not be able to verify work history.  Ask the candidate to provide you with his W-2s, which will also show past salary, the second-most falsely claimed information. 
  • Candidate uses multiple social media profiles to hide inappropriate behavior or offensive conduct.  If the applicant were smart, he would just restrict the “naughty” page to his friends or connections.  If the page is not restricted, it is yours for the finding.  Make sure you go beyond the profile the applicant provides to you and see if there are any other pages. 
  • Applicant intentionally provides inaccurate information, knowing exactly what his past or current employer will or will not verify.  If the past employer will not verify income, ask the candidate to provide you with his W-2s. 

Resume padding and other applicant sins have always existed, but with more people applying for fewer jobs, the problem has escalated. Employers need to ratchet up their verification efforts to avoid all the tricks that desperate or unsavory candidates use these days.  Ask for original documents whenever possible, and take nothing at face value.  In the age of employment mills, social media and Social Security fraud, due diligence requires much more work than in years past. 
:     Residents in Middleborough, Massachusetts, a town outside of Boston, at a town meeting voted to approve a proposal from the police chief to impose a $20 fine on public profanity.  (The residents voted on legislation?)  Officials insist the proposal was not intended to censor casual or private conversations, but instead to crack down on loud, profanity-laden language used by teens and other young people in the downtown area and public parks.  As reported by the Associated Press, the measure could raise questions about constitutional free speech rights (no kidding), but state law allows towns to enforce local laws that give police the power to arrest anyone who addresses another person with profane or obscene language in a public place.  (Try to enforce that one.)  The American Civil Liberties Union has said that the U.S. Supreme Court ruled the government cannot prohibit public speech just because it contains profanity.  (Damn.)  A town of about 20,000 residents, Middleborough perhaps is best known for its rich cranberry bogs.  (What in the world is a cranberry bog?  -- that where people from Ocean Spray wade?) 
13.    FPPTA 28TH ANNUAL CONFERENCE:   The Florida Public Pension Trustees Association’s 28th Annual Conference will take place on June 24-27, 2012 at the Hilton Walt Disney in Lake Buena Vista.  The hotel is located across the street from Downtown Disney and has complimentary transportation to Disney parks.  There are a variety of restaurants within the hotel including a Disney character breakfast Sundays at Covington Mill.  A link on FPPTA’s web site,, will take you to the Hilton Walt Disney site to make your room reservations.  Sunday, June 24th the Associates Advisory Board is sponsoring the 24th Annual Associates Charitable Golf Classic held on Disney’s beautiful Magnolia Golf Course. You may access information and updates about the Conference at FPPTA’s website.  All police officer and firefighter plan participants, board of trustee members, plan sponsors and anyone interested in the administration and operation of the Chapters 175 and 185 pension plans should take advantage of this Conference. 
14.    GOLF WISDOMS:     The rough will be mowed tomorrow.        
15.    PUNOGRAPHICS:     This girl said she recognized me from the vegetarian club, but I’d never met herbivore.            
16.    QUOTE OF THE WEEK:   “He has the deed half done who has made a beginning.”  Horace  
17.    ON THIS DAY IN HISTORY:  In 1948, Columbia commits to 33 1/3 rpm records, plans to phase out 78’s as Dr. Peter Goldmark of CBS demonstrates “long playing record.” 
18.    KEEP THOSE CARDS AND LETTERS COMING:  Several readers regularly supply us with suggestions or tips for newsletter items.  Please feel free to send us or point us to matters you think would be of interest to our readers.  Subject to editorial discretion, we may print them.  Rest assured that we will not publish any names as referring sources. 
19.    PLEASE SHARE OUR NEWSLETTER:  Our newsletter readership is not limited to the number of people who choose to enter a free subscription.  Many pension board administrators provide hard copies in their meeting agenda.  Other administrators forward the newsletter electronically to trustees.  In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at  Thank you.


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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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