Cypen & Cypen
DECEMBER 24, 2009
Stephen H. Cypen, Esq., Editor
1. FLORIDA PUBLIC RECORDS ACT AMENDMENTS REGARDING SOCIAL SECURITY NUMBERS: During the 2009 legislative session, the Florida Legislature passed, and Governor Crist signed, amendments to the Public Records Act found in Chapter 119, Florida Statutes. (See C&C Newsletter for December 13, 2007, Item 1 and C&C Newsletter for January 17, 2008, Item 1). The amendments require that public agencies identify in writing the specific federal or state laws governing collection, use and release of social security numbers for each purpose for which the agency collects the social security number.
Finally, the amendments eliminate agency reports of requests for social security numbers by commercial entities, and eliminate the annual notice of compliance and report to the Governor, President of the Senate and Speaker of the House.
As a result of this new legislation, we suggest that the Board adopt the following policy statement, and include it on all appropriate applications, forms and documents requiring social security numbers:
SOCIAL SECURITY NUMBER COLLECTION DISCLOSURE STATEMENT
Your social security number is requested for purposes of determining eligibility for retirement benefits as a plan member, retiree or beneficiary; for processing of retirement benefits; for verification of retirement benefits; for income reporting; or for other notice or disclosures related to retirement benefits. Your social security number will be used solely for one or more of these purposes. The collection and use of your social security number is authorized by Section 119.071(5)(a)(2)(a)(II), Florida Statutes.
To the extent that the Board is required to collect social security numbers pursuant to documents and forms prescribed by outside agencies, a copy of the above written disclosure statement should be provided to any individual completing a form that requests the individual’s social security number.
Text of the new law, enacted as Chapter 2009-237, Laws of Florida, can be accessed at: http://laws.flrules.org/files/Ch_2009-237.pdf
2. SEC APPROVES STRONGER SAFEGUARDS TO PROTECT CLIENTS’ ASSETS CONTROLLED BY INVESTMENT ADVISERS: The Securities and Exchange Commission has adopted rules designed substantially to increase protections for investors who turn their money and securities over to an investment adviser registered with SEC. The new rules provide safeguards where there is a heightened potential for fraud or theft of client assets. Most investment advisers do not maintain physical custody of their clients' assets. Instead, those assets are held by a qualified third-party custodian, such as a regulated bank or broker-dealer. However, over the past year, SEC has brought a series of enforcement cases against advisers who had access to their clients' assets, and misused them. These advisers often covered up the misuse by distributing false account statements to their clients, reflecting assets that did not really exist. SEC's new rules are intended to help prevent such abuse from happening. SEC's custody rule, as amended, would promote independent custody and require use of independent public accountants as third-party monitors. Depending on the investment adviser's custody agreement, the rules would require the adviser to be subject to a surprise exam and custody controls review that are generally not required under existing rules. The adviser is now required to engage an independent public accountant to conduct an annual "surprise exam" to verify that client assets exist. Such a surprise examination would provide another set of eyes on the client's assets, and provide additional protection against theft or misuse. The accountants would have to contact SEC if they discovered client assets were missing. When the adviser or an affiliate serves as custodian of client assets, the adviser is now required to obtain a written report, which, among other things, describes controls in place by the custodian, tests operating effectiveness of these controls and provides results of those tests. These reports are commonly known as SAS-70 reports. The new rules also will impose an important new control on advisers to hedge funds and other private funds that comply with the custody rule, by obtaining an audit of the fund and delivering the fund's financial statements to fund investors. The new rules also require that the adviser reasonably believe that the client's custodian delivers the account statements directly to the client, to provide greater assurance of integrity of these account statements. It also will enable clients to compare the account statement they receive from their adviser to determine that the account transactions are proper. The rule amendments are effective 60 days after publication in the Federal Register. Press Release 2009-269 (December 16, 2009).
3. WISCONSIN RELEASES STUDY OF MAJOR PUBLIC EMPLOYEE RETIREMENT SYSTEMS: The State of Wisconsin Legislative Council has issued a report entitled “2008 Comparative Study of Major Public Employee Retirement Systems.” The report compares significant features of major state and local public employee retirement systems in the United States. The report compares retirement benefits provided to general employees and teachers, rather than benefits applicable only to narrower categories of employees such as police, firefighters or elected officials. Generally, the report has been prepared every two years since 1982 by the Wisconsin Retirement Research Committee staff or the Legislative Council staff. (See C&C Newsletter for February 9, 2006, Item 6; apparently we missed the 2006 report.) The 2008 report includes data from the same 85 public employee retirement systems that have been compared in each of the previous reports. For 2008, two new systems were added in order to account for larger systems that have been split. The new systems are Kentucky CERS and Nebraska CEPP. Although the report does not cover all major public employee retirement systems, it does include at least one statewide plan from each state. Because the same public employee retirement systems have been covered in the report over time, it can be used to determine long-term trends in public employee retirement systems. The plans surveyed provide pension coverage for more than 12 million active employees and 6 million retirees and beneficiaries, a total of over 18 million participants. The total is 1.7% greater than the 17.7 million participants in the 2006 report. The number of active participants has decreased between the 2006 and the 2008 reports by 0.5%, while the number of retirees has grown by 6.3% in the same time period. The average ratio of active employees to retired employees has declined over prior years. For 2008, the average ratio was two, while comparable figures for 2006, 2004, 2002, 2000 and 1996, respectively, were 2.14, 2.24, 2.38, 2.52 and 2.89. In 70 of the 87 plans, participants are also covered under the federal Social Security program. Of the 17 public employee retirement systems that do not provide Social Security coverage, 10 represent pension plans covering teachers only. The decision on whether to participate in the Social Security program was at one time elective, rather than mandatory, for public employers. However, for those employers who elect coverage, future participation is mandatory. The entire comprehensive study can be accessed at www.legis.state.wi.us/lc/publications/crs/2008_retirement.pdf.
4. DELOITTE 2009 ETHICS & WORKPLACE SURVEY: “While the decision to post videos, pictures, thoughts, experiences, and observations to social networking sites is personal, a single act can create far-reaching ethical consequences for individuals as well as organizations. Therefore it is important for executives to be mindful of the implications and to elevate the discussion about the risks associated with it to the highest levels of leadership.” The foregoing quote, from Chairman of the Board of Deloitte LLP, prefaces Deloitte’s 2009 Ethics & Workplace Survey results. The phenomenal growth of online social networks is altering the way people communicate, share ideas and disseminate information. This enhanced world of connectivity is also rapidly blurring the lines between professional and private lives. And while the openness of these new communications tools creates great opportunities, they can cause ethical dilemmas for individuals and present many challenges for businesses that can leave brands exposed and vulnerable. Deloitte’s most current survey shows that there is a great reputational risk associated with social networking. Organizations grapple with the notion of reputational risk within context of employee self-expression. Meanwhile, news of major global brands being impacted by online activities of their people suggests that discussions around this topic need to be elevated to the highest levels of leadership. So, what should business leaders do? The easy answer is to establish policies and protocols. However, the survey
Note to corporate execs: hold on to your wear.
5. ADA CLAIMS DISCHARGEABLE IN BANKRUPTCY: Rederford, who had worked for US Airways for twenty-four years as a Customer Service Representative and suffered from Lupus disease, claimed that US Airways' termination of her employment violated her rights under the Americans with Disabilities Act. Her lawsuit brought in Federal District Court was dismissed on grounds that the ADA claims had been disallowed and also had been discharged as claims under the Bankruptcy Code in the airline’s bankruptcy. In affirming the dismissal, the appellate court found the issues, involving interplay between the Bankruptcy Code’s definition of “claims” and causes asserted under federal employment discrimination law, to be ones of first impression. In enacting the definition of “claims” under the Bankruptcy Code, Congress gave the term its broadest available definition. The right to an equitable remedy, whether or not fixed, disputed or reduced to judgment, is a claim within meaning of the Bankruptcy Code, and subject to Bankruptcy proceedings, if a monetary payment is an alternative to the equitable remedy. Because money damages were an alternative remedy for reinstatement following wrongful termination, Rederford’s claim was within jurisdiction of the Bankruptcy Court and so disallowed and discharged. Rederford could not preserve her right to reinstatement by limiting her recovery of equitable relief. Allowing her to do so would grant her the equivalent of the preference over other creditors, who only had claims for monetary damages or who had agreed to accept liquidated damages for their equitable claims, by allowing her to avoid priorization of claims established in the Bankruptcy proceeding. Rederford v. US Airways, Inc., Case No. 09-1005 (US 1st Cir., December 14, 2009).
6. SAN DIEGO JUDGE REJECTS PENSION BENEFIT FOR UNION HEADS: A disputed San Diego pension benefit that went to union presidents has been struck down by a San Diego Superior Court judge, according to signonsandiego.com. The ruling came in a lawsuit filed by former heads of the San Diego Police Officers Association. They sued after the city ended a retirement benefit that allowed union presidents to combine their city salaries with their union salaries for calculating their pension payments. The judge ruled that the benefit was invalid because the City Council did not comply with the city charter when it unanimously adopted a resolution approving it 2002. He concluded that the charter requires the city also to adopt an ordinance to make the benefit official. Without such ordinance, the judge wrote, there was no valid, enforceable contract that the city was obligated to follow. The ruling drew predictably mixed reactions from both sides in the continuing battle over the city’s pension obligations. The City Attorney said the decision affects only a small number of people directly, but the principles laid out could have broader application. The lawyer for the former police union presidents vowed to appeal. Similar lawsuits have been filed by former presidents of the Municipal Employees Association and the firefighters union, who also received the benefit and are suing to have it restored. In the MEA case, before a different judge, the city’s attempt to have the lawsuit dismissed failed, as that judge said he wanted more information on the history of the benefit, and declined to toss the case.
7. WHITE CONNECTICUT FIREFIGHTERS SEEK BACK PAY, DAMAGES: A group of white New Haven, Connecticut firefighters who won a discrimination case before the U.S. Supreme Court are seeking back pay, damages and legal fees, according to washingtonexaminer.com. That court ruled in June that city officials had violated white firefighters' civil rights when they threw out 2003 test results in which too few minorities did well. Ricci v. DeStefano, Case No. 07-1428 (U.S., June 29, 2009) (see C&C Newsletter for July 2, 2009, Item 1). Fourteen firefighters who sued have been promoted to lieutenant and captain (see C&C Newsletter for November 19, 2009, Item 12). The firefighters now argue that they are entitled to back pay with interest for long-overdue promotions, several categories of damages and attorneys’ fees. New Haven officials say the Supreme Court ruling is limited to relief for the 14 plaintiffs who would have been promoted if the 2003 tests had been certified. (On the other hand, an attorney for the firefighters said other firefighters who sued and were not promoted reserved their right to challenge the city's position that they were not entitled to promotions but were entitled to damages.) And miles to go before I sleep. And miles to go before I sleep.
8. DALLAS $1 BILLION FIRST-RESPONDER SUIT IN HANDS OF TEXAS SUPREME COURT: A long-running legal dispute between the city of Dallas and 5,000 firefighters and police officers is now in the hands of the Texas Supreme Court. Dallas Business Journal reports that the court will decide whether the city of Dallas can claim sovereign immunity to exempt itself from two lawsuits filed in 1994. The 1994 lawsuits were filed by firefighters and police officers attempting to enforce a 1979 ordinance related to first-responder salaries. Back then, voters had approved a referendum that said the pay of front line officers should increase over time, so salaries of top command are consistently within the same differential as front line officers. Parties to the suit estimate that back-pay for eligible employees over the period in question could top $1 Billion. An attorney for the employees said things worked according to the ordinance initially, but over time, pay increases of the department’s top command were not in proportion to pay of front line officers and firefighters. The discrepancy led to filing of the 1994 case, which has been delayed with several interim appeals. The city’s position is that the pay increase promised by voters in 1979 was a one-time, 15 percent-pay increase, and that the city has fully complied with the referendum. The eyes of Texas are upon you.
Prediction. The unemployment rate will top out at 8% in the third quarter of 2009 if the Obama stimulus plan is approved.
Reality. The jobless rate hit 10.2% in October despite approval of the Obama plan.
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Prediction. This looks an awful lot like the beginning of a second Great Depression.
Reality. Although Congress was not as bold as some wanted, the economy was growing by the third quarter anyway.
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Prediction. President-elect Obama will be able to do things at warp speed that no other President has been able to do in a long time.
Reality. Obama was almost stymied by united Republican opposition on multiple fronts, including health care.
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Prediction. Under robust leadership of Sheikh Mohammed, the United Arab Emirates and Dubai are enjoying rapid change and development that is providing a clear lead in the Gulf.
Reality. Dubai's overextended property developers struggled to pay interest on their towering debts and had to be bailed out with $10 Billion from Abu Dhabi.
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Prediction. The current level of influenza pandemic alert has been raised from Phase 4 to Phase 5, which means that a global outbreak is imminent. It really is all of humanity that is under threat during a pandemic.
Reality. Although H1N1 did spread globally, it is hard to argue that all of humanity was under threat.
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Prediction. A quick, prepackaged bankruptcy for General Motors might stall, leading to a long period of bankruptcy which could result in liquidation of the company.
Reality. GM raced through bankruptcy court in 40 days and by the end of September was sitting on $43 Billion in cash.
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Prediction. Tiger never does anything that would make him look ridiculous.
Reality. Sponsors yanked ads featuring Woods after he crashed his car and later admitted to infidelity.
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Reality. A week after this prediction, stocks hit bottom. By mid-December, the S&P 500 was up 64% from its low.
Note, the Tiger quote comes from Golf Digest, on how President Barack Obama could learn from golf great Tiger Woods!
11. FABULOUS RANDOM THOUGHTS: Have you ever been walking down the street and realized that you're going in the complete opposite direction of where you are supposed to be going? But instead of just turning a 180 and walking back in the direction from which you came, you first have to do something like check your watch or phone or make a grand arm gesture and mutter to yourself to ensure that no one in the surrounding area thinks you're crazy by abruptly switching directions on the sidewalk.
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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.