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Cypen & Cypen
June 14, 2018

Stephen H. Cypen, Esq., Editor

Governor Rick Scott announced that Florida’s crime rate is now at a 47-year low. The crime rate has dropped six percent since 2016, and since Gov. Scott took office, the crime rate has dropped 27 percent. In 2017, there were 28,640 fewer crimes than in 2016, which is a 4.5 percent decrease. This year, Governor Scott was proud to invest more than $5.2 billion in public safety in the Securing Florida’s Future budget. Governor Scott said, “We continue to make investments each year to keep our communities safe, and these investments are working. I’m proud to announce that crime is at a 47-year low in our state. Our state’s continuously decreasing crime rate is a reminder of the dedication and hard work of Florida’s law enforcement officers. We must continue to support and thank them every day for their commitment to keeping Florida families safe.” Florida Attorney General Pam Bondi said, “Our crime rate continues to decline because of our brave law enforcement officers and dedicated prosecutors. Sadly, Florida has lost five law enforcement heroes this year, and while we celebrate the state’s lowest crime rate in 47 years, let’s not forget the high price of our safety and the heroes who pay it.” Florida Commissioner of Agriculture Adam H. Putnam said, “Florida’s 47-year low crime rate is due to the tireless and selfless efforts of our law enforcement officers. Our law enforcement officers face unprecedented challenges, yet continue courageously to protect Floridians and visitors. Let us all be grateful for the brave men and women who protect our communities and make our state the best place to live, work and raise families.” Chief Financial Officer and State Fire Marshal Jimmy Patronis said, “The men and women behind the badge lay their lives on the line every day as they answer our calls for help. Law enforcement officials are the fabric of our communities. As a result, their steadfast commitment to protecting Floridians, our state has now embraced the lowest crime rate we’ve seen in 47 years – an accomplishment that is nothing short of remarkable. While there is always more work to be done, Floridians have a lot to be thankful for and we couldn’t be any happier with this most recent accomplishment.” Florida Department of Law Enforcement Commissioner Rick Swearingen said, “I want to thank Florida’s more than 45,000 law enforcement officers working to keep our communities safe. These officers are routinely called into dangerous and volatile situations risking their own lives to protect ours.” Walton County Sheriff Michael Adkinson, Florida Sheriffs Association President, said, “This marks another year of lower crime rates due to the dedication and expertise of law enforcement across the state. The 67 Sheriffs of Florida salute the hard-working men and women who hold the line every minute, of every day, to keep Floridians and our visitors safe. We will continue to protect and serve, and conduct annual strategic operations through the Florida Sheriffs Task Force to set the bar for the rest of the nation.” Miami Shores Police Chief Kevin Lystad, Florida Police Chiefs Association President, said, "Each and every day, law enforcement officers are working in their communities to reduce crime and keep Florida safe. The good news is that we’ve seen the overall crime rate continue to decrease, but there’s been an uptick in domestic violence and forcible sex offenses. These are issues every community faces and we encourage citizens to continue to report these crimes so law enforcement officers can get offenders off the street." R.J. Larizza, President of the Florida Prosecuting Attorneys Association, said, “State Attorneys across Florida work every day to ensure that Florida communities are safe. We would like to thank Governor Scott, the Florida Cabinet, FDLE and all of our law enforcement partners for working together to reach today’s achievement.” View the 2017 Annual Uniform Crime Report here. The announcement appears in Florida Trend.
Florida Trend says that a new report from the state's independent, nonpartisan, nonprofit government watchdog and taxpayer research institute, Florida TaxWatch, shows that failure to make permanent the non-homestead exemption cap could result in Floridians paying as much as $700 million more in property taxes annually. However, Florida voters will have the chance to protect themselves from higher property taxes by voting “yes” on Amendment 2 this November. Since voters passed the non-homestead 10 percent tax cap in 2008, this safeguard has helped to stem the multi-billion dollar tax shift from homestead to non-homestead properties. This cap is scheduled to expire on January 1, 2019, but Florida voters can stop that from happening. “Allowing the cap to expire will result in a property tax hike that will unfairly and severely impact renters and seniors on fixed incomes, businesses, owners of undeveloped land and part-time residents,” said Dominic M. Calabro, President, and CEO of Florida TaxWatch. "Property taxes are Florida’s largest state and local tax source, and the disparity between homestead and non-homestead property taxes is already significant. While Florida has done a great job protecting homesteaded residents from tax increases, similar protections should be left in place for non-homestead properties. Floridians should vote for Amendment 2 this November.” "We are grateful to have the respected expertise of Florida TaxWatch on this important issue. Making the 10 percent non-homestead tax cap permanent in Florida impacts everybody in the state. It allows business owners to plan for the future by having a better grasp on their budgets, so they can expand and create more jobs. It helps renters continue to afford their housing as they save to one day purchase a home," said Carrie O'Rourke, Vice President of Public Policy for the Florida Association of REALTORS®. "Prior to the non-homestead tax cap, nearly three out of four non-homestead properties in Florida had taxes increases of more than 10 percent year to year. In 2006, 30 percent of non-homestead properties were hit with an 80 percent hike from just the year before. Florida cannot continue to move forward with these kinds of tax hikes." “Hispanic businesses throughout the state of Florida are crucial to the economic success of our state,” said Julio Fuentes, president of the Florida State Hispanic Chamber of Commerce.  “Passing Amendment 2 will help protect small businesses from large tax increases and allow for them to keep prices low, which in turn helps local communities.” Floridians will be able to vote to make the non-homestead tax cap permanent on the 2018 General Election ballot in November. The non-homestead exemption cap protects all non-homestead property from an even more disproportionate property tax system and future spikes in assessments and stands as the only significant exemption afforded these types of real property under Florida’s current system. It is vital to Florida’s economy and taxpayers that Amendment 2 is passed in November. Read the full research report here.
Did you know that the Centers for Medicare and Medicaid Services is sending new cards with new Medicare numbers to everyone with Medicare? Instead of your Social Security Number (SSN), your new Medicare card will include a new number unique to you. This will help to protect you against identity theft and protect Medicare from fraud. Medicare will automatically mail your new card to the address you have on file with Social Security. As long as your address is up to date, there’s nothing you need to do! If you need to update your address, use your personal my Social Security account. Mailing millions of Medicare cards takes some time, so you might get your card at a different time than friends or neighbors in your area. Want to know when to expect your new card? Visit and sign up to get email alerts from Medicare. Medicare will send you an email when cards start mailing in your state, and also email you about other important Medicare topics. You can also sign in to your account and see when your card is mailed. (If you don’t have a account yet, visit to create one.) Once your new card has mailed, you can sign in anytime to see your new Medicare number or print a copy of your card. When you’ve received your new Medicare card, take these steps to protect your information and identity:

  • Destroy your old Medicare card right away. Make sure you destroy your old card to help protect your SSN and other personal information.
  • Start using your new Medicare card. Doctors, other health care providers, and plans approved by Medicare know that Medicare is replacing the old cards, so carry the new card with you. They are ready to accept your new card when you need care. Your Medicare coverage and benefits will stay the same.
  • Keep your Medicare Advantage Plan card. If you are in a Medicare Advantage Plan (like an HMO or PPO), keep using your Medicare Advantage Plan ID card whenever you need care. However, you should also carry your new Medicare card—you may be asked to show it.
  • Protect your Medicare Number as you would your credit cards. Only give your new Medicare Number to doctors, pharmacists, other health care providers, your insurer or people you trust to work with Medicare on your behalf. Beware of people contacting you about your new Medicare card and asking you for your Medicare number, personal information or to pay a fee for your new card. Medicare will never contact you uninvited to ask for your personal information. For more information about your new Medicare card, visit You can also visit for tips to prevent Medicare fraud.

Posted by Seema Verma, Administrator of the Centers for Medicare and Medicaid Services, on May 17, 2018.
According to Mayra Rodríguez Valladares, market signals are showing that anyone invested in municipal bonds should be looking at this market very carefully. The Bloomberg Barclays Municipal Bond Index dropped 1.1% in the first three months of 2018. While the decrease may seem small, this is the biggest first-quarter decline in 15 years. Additionally, investors pulled about $830 million out of state and local government bond mutual funds during the week ended April 11, the biggest outflow since January 2017, and the second straight week of investors pulling cash from mutual funds. Also, because many municipalities rushed to issue debt last year, this year, bond issuance has decreased substantially and is expected to remain at lower levels the rest of the year. The new federal tax law signed into effect at the end of 2017 has left municipalities scrambling to figure out how much they will have in tax receipts. Moreover, any municipality that did not borrow last year is now confronting issuing debt in a rising interest rate environment. This means that municipalities’ cost of borrowing will be going up, precisely when they may struggle to get more taxes from residents, whose property values may decrease due to the new federal tax law’s limitation on state and local tax deductions. Local elected officials and municipality personnel increasingly are being asked to do more with less. Unfortunately, most municipalities are used to producing financials and a budget annually, which by the time they are produced and available to residents and investors, the information is already old and not particularly useful. Now, more than ever municipalities should create long-term financial models and plans that are updated frequently with relevant economic and market data. Municipalities are challenged by uncertainties caused by the new federal tax law, rising medical costs and pervasive underfunded pension problemsAdditionally, having to operate in a rising interest rate environment and with a potential trade war looming, municipalities need to factor how potential economic, market, or operational risks, such as natural disasters or cyberattacks, could impact their financial stability. Based on professional experience working with different kinds of private and public sector entities, having a long-term plan provides a dynamic tool to help organizations preserve assets, identify where they may be funding gaps, and to identify potential income shortfalls. For municipalities specifically, elected officials and municipal personnel should quantitatively determine the priorities of their constituents to help them determine funding needs for infrastructure development or other community priorities, and to identify potential income shortfalls from residential or retail tax payors. Sharing this view are also international standard setters and state comptrollers. For example, the Government Finance Officers Association of the U.S. and Canada, an important best practices standard-setter for public finance officials, advocates for “long-term financial planning as a highly collaborative process that considers future scenarios and helps governments navigate challenges.” Moreover, the GFOA believes that “long-term financial planning works best as part of an overall strategic plan.” State comptrollers and treasurers also advocate the creation and implementation of long-term financial plans. The Office of the New York State Comptroller, for example, not only recommends that municipalities create a long-term plan to cope with “future stresses,” but also includes on its website a useful manual on how to create a long-term plan. If you have made it this far, dear reader, you can be forgiven for thinking that the above is common sense advice. Unfortunately, very few municipalities in the U.S. have long-term financial models and plans. This is sometimes because of lack of personnel who have the skills to create a long-term financial model and plan. In the U.S., however, often only municipalities that are in trouble are required by state authorities to create a long-term financial plan, as was the case with New York City and Stockton, California. Having learned its lesson, Stockton now has a 30-year plan that it uses for budgeting and planning purposes; New York City’s plan has a five-year forecast. GOVERNING, the U.S.’s leading media platform covering politics, policy and management for state and local government leaders, just published its annual survey "Equipt to Innovate." This survey focuses on seven areas necessary for “having a high-performing government: being dynamically planned, broadly partnered, resident-involved, race-informed, smartly resourced, employee-engaged and data-driven.” Of the 74 top municipalities participating in the survey, only 32% had long-term plans that look ahead by three to five years. A number of municipal ratings analysts, who, off the record, said that in their experience very few municipalities have long-term financial plans in place. Unfortunately, a lack of long-term planning leaves municipalities vulnerable to being more reactive than proactive. Municipalities may take long term planning seriously if more global ratings analysts speak about the issue publicly. For example, in speaking to Bloomberg Government recently, Standard and Poor’s analyst Kurt Forsgren said: What bond-rating agencies are hoping to learn and are increasingly asking cities is how cities are approaching long-term planning, both from an asset and revenue-stream perspective.” This is the type of statement that municipal leaders should take note of. Moreover, any investor in municipal bonds should be asking those issuers what their long-term plan for their financial stability is.
John Manganaro writes about a new report published by the Society of Actuaries (SOA) throws into sharp detail the challenges faced by the U.S. multiemployer pension system. Speaking about the report, Lisa Schilling, retirement research actuary for SOA, quickly pointed out that there are many multiemployer pensions that are healthy and more or less entirely financially fit. In fact, there are more than 1,200 multiemployer pension plans in the United States today, covering about 10 million participants, including roughly 4 million retirees. However, while most multiemployer plans are financially stable, a growing number have been identified under federal law as “critical and declining.” The study identifies more than 100 such plans that are meant to be representative of the larger problem, excluding plans receiving Pension Benefit Guaranty Corporation (PBGC) financial assistance or that have received approval for benefit suspensions under the Kline-Miller Multiemployer Pension Reform Act of 2014. These plans cover roughly 1.4 million participants—about 719,000 of them retired and receiving annual benefits totaling more than $7.4 billion. As the SOA’s report shows, approximately 11,600 employers contribute to these financially stressed multiemployer pension plans. Broadly speaking, many of these plans are at risk of becoming insolvent within fewer than 10 years, the research warns. Such insolvencies will obviously be harmful to the participants and beneficiaries of the plans in question, but the loss of the significant economic momentum provided by retirees spending their pension plan assets could also harm the wider economy and, by extension, employers that otherwise have little affiliation with the troubled multiemployer pension industry. The estimated unfunded liability of these plans is $107.4 billion when measured at a 2.90% discount rate. In the sample, there are 21 plans with approximately 95,000 participants that are projected to become insolvent by 2023, and 48 plans with approximately 545,000 participants are projected to become insolvent by 2028. On average, only about two-thirds of the pension benefits are estimated to be guaranteed by the PBGC. Overall, the authors anticipate that some 107 plans will run out of assets over the next 20 years, affecting over 11,000 contributing employers and roughly 875,000 participants. These projections assume future annual investment returns of 6%. This assumption was developed from several recently published capital market outlook reports and surveys of various investment advisers, and, therefore, differs from the long-term expected rates of return typically used for minimum funding purposes. Projections that use more detailed plan-specific data may render somewhat different results, although the general outcomes would likely be similar. SOA’s data suggest the estimated 2018 unfunded liability for these 115 plans, as measured on a minimum funding basis, is $57 billion. (When measured at 2.90%, it is $108 billion. The discount rate of 2.90% represents a liability-weighted average of Treasury rates in April 2018.) When Treasury rates are used to discount only the plan’s unreduced benefit obligations after the point of projected plan insolvency, and the minimum funding basis discount rate is used otherwise, these plans’ total unfunded liability is $76 billion, the report states. Note that these liabilities reflect full plan benefits without regard to PBGC guarantee limits. Some of the conclusions in the report suggest many of these plans are not likely to be able to effect a course correction without outside influence: Even with extraordinarily optimistic investment returns of 10% per year for 20 years, 68 of the 115 plans would be projected to become insolvent within 20 years. Optimistic investment returns have limited impact on insolvency among these plans primarily because their net cash flow positions tend to be severely negative. In 2018, 81 of the plans have annual negative net cash flow that is 10% or more of their assets. In other words, unless these plans’ assets earn at least 10% per year, the assets will decline. Twenty-seven of the plans have negative net cash flow that is 20% or more of their assets. This set of plans includes a number that are large enough such that, if and when they run out of money, they could individually end up sinking the PBGC’s multiemployer insurance program outright. What that means is that the PBGC wound no longer be able to pay out even its very modest benefits to the sizable number of multiemployer pension plans that have already gone insolvent in the past. That would represent an even greater economic blow for everyone involved. You could have folks retiring after 30 years of service literally getting a few thousand dollars a year from a pension that should have been worth far, far more. You have to ask, what will happen to food stamps and all the other social programs that are out there to help prop people up when their income falls short? It’s not encouraging. Thinking about where these issues may lead, Schilling says it seems clear that Congress must act soon and with gusto, or else no real solution will likely be possible. To this end, she is optimistic that U.S. Senators Orrin Hatch and Sherrod Brown are seeking public and industry input on ways to improve the solvency of multiemployer pension plans and the PBGC. However, like many others, she is skeptical that legislative action will be taken prior to the mid-term election. This is a particular shame because many of these plans are already past the point of no return, and the sooner we can act, the better the outcome is going to be for everyone. The SOA report was advised and reviewed by a team of researchers, including Christian Benjaminson, James Dexter, Cary Franklin, Eli Greenblum and Ellen Kleinstuber. The full text is available for download here.
America’s taxpayers have specific rights when they interact with the IRS. These ten rights are known collectively as the Taxpayer Bill of Rights. These rights cover a wide range of topics and issues, and lay out what taxpayers can expect in the event they need to work with the IRS on a tax matter. This includes when a taxpayer is filing a return, paying taxes, responding to a letter, going through an audit or appealing an IRS decision. The IRS recently issued a series of 10 Tax Tips, each exploring one of the 10 rights in depth. Here are the 10 rights outlined in the Taxpayer Bill of Rights with links to the Tax Tips in this recent series:

More Information:

 Tax Tip 2018-76, May 16, 2018
When people stop working, they need a retirement income, according to The Economist. Some are lucky enough to have an employer-provided pension linked to their salary. Everyone else faces a difficult choice. Some keep their pension pot in cash and watch as it is eroded by inflation. Others use savings products with high fees and risk being hurt by a stockmarket downturn. A third option is an annuity, which guarantees a lifelong income but vanishes at death, even if that is a week after retirement. Lionel Martellini of EDHEC, a French business school, and Robert Merton of the Massachusetts Institute of Technology (a Nobel laureate in economics) have come up with an alternative. Workers would buy government-issued bonds while in employment; these would pay no interest until retirement. Over the next 20 years (the typical life expectancy on retirement) bondholders would receive payments comprising interest plus the return of the capital. These would be linked to inflation, or another measure such as average consumption. So a worker born in 1970, say, would buy a bond that made payments from 2035 until 2055. Every financial innovation needs an acronym, and these are called SeLFIES (Standard of Living Indexed, Forward-starting Income-only Securities). They would act somewhat like annuities, though without protecting against the risk of living much longer than expected. One big advantage is that if holders die before the maturity date, the capital would be passed to their heirs. They could also be attractive to corporate pension funds and institutions such as sovereign-wealth funds. But if bond yields stay as low as they are now, workers will still need a big pension pot to be able to retire comfortably. The median pension pot of an American aged 40-55 is $14,500. That will not generate much income, whatever security it buys. This article appeared in the Finance and economics section of the print edition under the headline “Will Selfies stick?”
The amount spent per pupil for public elementary-secondary education for all 50 states and the District of Columbia increased by 3.2 percent to $11,762 during the 2016 fiscal year, according to new tables released by the U.S. Census Bureau. The increase in spending in 2016 was due in part to the increase in revenue across all 50 states and the District of Columbia. In 2016, public elementary-secondary education revenue, from all sources, amounted to $670.9 billion, up 4.6 percent from the prior year. This is the largest increase since 2007. Of the 50 states, New York ($22,366), the District of Columbia ($19,159), Connecticut ($18,958), New Jersey ($18,402) and Vermont ($17,873) spent the most per pupil in 2016. California (9.8 percent), Washington (7.4 percent), Hawaii (7.0 percent), Utah (5.8 percent) and New York (5.5 percent) saw the largest percentage increases in current spending per pupil from 2015 to 2016. To see the top 10 school districts by current spending per pupil, see the graphic Top 10 Largest School Districts by Per Pupil Current Spending. Within public school systems, Mississippi (14.6 percent), Arizona (13.8 percent), South Dakota (13.5 percent), New Mexico (13.5 percent) and Montana (12.4 percent) received the highest percentage of their revenues from the federal government, while public school systems in New Jersey (4.1 percent), Connecticut (4.2 percent), Massachusetts (4.4 percent), New York (5.1 percent) and Minnesota (5.3 percent) received the lowest. These statistics come from the 2016 Annual Survey of School System Finances. Education finance data include revenues, expenditures, debt and assets (cash and security holdings) of elementary-secondary (prekindergarten through 12th grade) public school systems. Statistics cover school systems in all states and include the District of Columbia. No news release associated with this product. TIP SHEET: CB18-TPS.28: May 21, 2018.

What Government Accountability Office (U.S. GOA) Found
Few retirement plans in the United States incorporate environmental, social and governance (ESG) factors into their investments according to available data. ESG factors that may affect investment returns include climate risk, executive compensation, and workplace safety issues among others. According to GAO's interviews with seven asset managers, inconsistent data and regulatory uncertainty create challenges to incorporating ESG factors in plan investment management. However, those plans considering ESG factors use various strategies to do so (see figure). Asset managers and plan representatives said they incorporate ESG factors to better manage risks and improve performance. Strategies Used to Incorporate ESG Factors into Investment Management. The retirement plans GAO reviewed in France, the Netherlands, and the United Kingdom (UK) reported using integration and other strategies to incorporate ESG factors across their investments, particularly to address the risk of climate change. For example, the UK's National Employment Savings Trust—a defined contribution plan—used an ESG integration strategy in developing its default fund for participants who are automatically enrolled and do not select another investment. As part of their ESG strategies, representatives from these plans described targeted efforts to address climate risk related to financial performance. These representatives also said they are subject to governmental policies that encourage plans to address ESG risks. In the United States, the Department of Labor's (DOL) guidance for private sector plans identifies ESG factors as proper components of investment analysis, but does not fully address uncertainties plans may face. In particular, sponsors of defined contribution plans face uncertainty about whether they may use ESG factors in a qualifying default fund—a widely used option in which a fiduciary is generally not liable for investment losses. DOL's mission includes assisting and educating plan fiduciaries. Providing clearer information about how to use ESG factors would help fiduciaries better understand whether and how to consider these potentially material risks. DOL is also considering steps to collect data on the use of ESG factors by retirement plans.
Why U.S. GAO Did This Study
ESG factors have emerged as a way for investors, such as retirement plans, to capture information on potential risks and opportunities that may otherwise not be taken into account. For example, climate change is expected to have widespread impacts according to a key federal study and may pose significant financial risks for long term investors, such as retirement plans that must manage risk to provide benefits for many years to come. A number of large plans in other countries have adopted ESG strategies, but less is known about their use among U.S. plans. Given the emerging use of ESG factors, GAO was asked to examine how such factors are used by retirement plans in the United States and other countries. GAO examined: (1) the use of ESG factors by U.S. retirement plans, (2) the use of ESG factors by selected retirement plans in other countries, and (3) DOL's guidance on the use of ESG factors by private sector U.S. retirement plans. GAO reviewed available private sector survey data and other documentation and interviewed government officials, asset managers, and plan representatives in the United States, France, the Netherlands, and the United Kingdom—from retirement plans that were identified as leading examples in the use of ESG factors.
What U.S. GAO Recommends
GAO is making two recommendations to DOL, including that DOL clarify whether the liability protection offered to qualifying default investment options allows use of ESG factors. DOL neither agreed nor disagreed with GAO's recommendations. GAO-18-398: May 22, 2018.
Social Security is with you from day one, which makes us the source for the most popular baby names! For many people, Social Security starts at birth when you get your first Social Security card. We’re able to determine the most popular baby names from the prior year based on requests for Social Security numbers for newborns. And every year, the top 10 names for boys and girls can reflect cultural shifts during the prior year. What were the most popular names of 2017? Coming in at number 10 are Jacob and Abigail, dropping lower on the list compared to 2016’s list. At number 9, Oliver and Evelyn, both of whom finally broke into the top 10 after coming close last year, the latter for the first time since 1915! In fact, there are several names celebrating their first introduction to the list; you can read the rest of the top 10 on our baby names page! The birth or adoption of a child is a special time for families. No matter the inspiration for your child’s name, you can rest easy knowing we are with you and your child starting from when you choose their special name. Most parents apply for their child’s Social Security number at birth, usually through the hospital. They will need that number throughout many stages in life, beginning when you claim your child on your tax return. It will also be useful if you need to apply for benefits for your child. We offer a wide range of resources for families with children. And, when the time comes for their first job, their number is already in place. Visit our baby names pageto see how popular your name or your child’s name was over the past 100 years! Share it with friends and family members who may be expecting a child or grandchild. Maybe they’ll find a name on our list that they love, thanks to you! Social Security is with you and your child throughout life’s journey. See what else you can do online at! Posted by Jim Borland, Acting Deputy Commissioner for Communications.
A piece by Steve Thompson, staff writer for The Dallas Morning News, informs that the Dallas police and fire pension fund has won a settlement worth at least $2 million from an advisory firm that officials blame for some of the fund’s disastrous real-estate investments. While the money will not come close to covering the $320 million in losses the fund blames on the firm, the deal requires the men who ran the firm to cooperate as the fund goes after others who profited while it lost hundreds of millions of dollars. The Dallas Morning News obtained a copy of the legal settlement between the fund and a major consultant, CDK Realty Advisors, using an open-records request. The settlement was then finalized. City officials, who complain they had little control over the fund’s activities but are now being forced to find a way to bail it out, had mixed reactions to the settlement. “We need every dime possible coming into the fund, especially from those that played a role in its downfall,” Mayor Mike Rawlings said in a statement. “This settlement appears to be a small step in the right direction, though I still hope to see more transparency and details about the scope of the alleged wrongdoing by CDK.” Lee Kleinman, a City Council member and former member of the fund’s board, said he was “shocked CDK got off the hook for a mere $2 million considering the amount of fees they bilked out of the system over the past decade.” But others highlighted the importance of getting CDK’s cooperation. “We could have hammered these guys a lot harder perhaps” by taking the matter to trial, said Philip Kingston, another city councilman who serves on the fund’s board. “But getting their cooperation to chase down other potential sources of recovery I think was really important.” The fund’s top staffer, Kelly Gottschalk, whom the board hired in 2015, declined to comment on the settlement. A lawyer for CDK stressed Monday that the settlement is not an “admission of any wrongdoing or liability for any claims.” “CDK Realty Advisors was one of several commercial real estate managers hired by the Pension System,” Steven A. Schneider said in a statement. “CDK was not involved in or responsible for the design and construction” of the controversial Museum Tower in the city’s Arts District. He said the firm was also not involved in the fund’s high-profile investments in luxury homes in Hawaii and a resort and vineyard in Napa County, Cal. The firm has contended in a court filing that the real-estate investments it recommended were profitable for the fund. CDK at one time managed more than $700 million for the fund, which once had more than $3 billion in assets. For many years the small firm and the fund both had their headquarters in the same office building. Their relationship soured after the fund’s longtime administrator, Richard Tettamant, was ousted in 2014 and new management began cleaning house. Tettamant did not respond to a request for comment. Last April, FBI agents raided CDK’s offices, carting out boxes of documents. It is not clear whether that raid is connected to a federal grand jury’s criminal inquiry relating to the fund, which the fund’s lawyers confirmed in January. After CDK sued the pension fund, accusing it of failing to pay management fees, the fund responded with a blistering countersuit. It accused CDK of involving the fund in high-risk investments that "have resulted in write-downs and losses of more than $320 million,” money that “should have been safeguarded for the benefit of Dallas’s loyal and hardworking police officers and firefighters.” The settlement, finalized this month, includes $800,000 from CDK’s principals, Kenneth Cooley, Jon Donahue and Brent Kroener, to be paid by their insurer. Each man promised that certain of their other assets that could have been obtained in any judgment against them were not worth more than $100,000. CDK also turned over its interest in the building at 4100 Harry Hines Blvd. that it shared with the fund. The agreement valued that interest at $1.2 million. Another key piece of the settlement was that Cooley, Donahue and Kroener will cooperate by providing information and testimony in the event of a “court proceeding against a person or entity with whom or which CDK has a relationship,” according to the settlement agreement. CDK’s principals started a new firm last year called Harvest Interests. Cooley spoke to the Lubbock Fire Pension Fund in November about moving forward with real estate investments, according to meeting minutes. Cooley said “they had settled with Dallas Police and Fire, but the paperwork was still being worked through,” according to the minutes. Cooley told the Lubbock fund that CDK will become defunct at some point in the future after investments it manages are sold, the minutes say. Cooley went over the strengths and weakness of several investments, the minutes say, “along with steps being taken to get lagging projects back in line with original performance expectations.”
Please note that Cypen & Cypen has a new office address: Cypen & Cypen, 975 Arthur Godfrey Road, Suite 500, Miami Beach, Florida 33140. All other contact information remains the same.
I tried to catch some fog. I mist.
It is during our darkest moments that we must focus to see the light. - Aristotle
On this day in 1777, the American flag was adopted by resolution of the Second Continental Congress. The day is commemorated as Flag Day.



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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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