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January, 2001

Stephen H. Cypen, Esq., Editor

1. EEOC ISSUES ENFORCEMENT GUIDANCE ON MEDICAL INQUIRIES AND EXAMINATIONS DURING EMPLOYMENT: We learned, from Buck Consultants, that the Equal Employment Opportunity Commission has issued enforcement guidance that explains the circumstances under which employers may make disability-related inquiries or require medical examinations of current employees without violating the Americans with Disabilities Act. Title I of ADA limits an employer’s ability to make disability-related inquiries or require medical examinations at three stages of the employment process: pre-offer, post-offer and during employment. In 1995, EEOC issued enforcement guidance on disability-related inquiries and medical examinations at the first two stages. Now EEOC has issued enforcement guidance focusing on ADA’s limitations on such inquiries and examinations during employment. The guidelines apply to all state and local government employers and to private employers with fifteen or more employees. Importantly, they apply to inquiries and examinations of all employees, not just those with disabilities. ADA permits disability-related inquiries and medical examinations of employees only if “job-related and consistent with business necessity.” The foregoing standard is met only when the employer has a reasonable belief, based on objective evidence or on information provided by a reliable source that either (1) the employee is unable to perform the essential functions of his or her job because of a medical condition or (2) the employee will pose a direct threat because of a medical condition. The guidance stresses that this belief must be based on an assessment of the individual employee and his or her position, and cannot be based on general assumptions regarding the particular medical condition. An employer may also obtain medical information when (1) an employee has requested a reasonable accommodation where the disability or need for accommodation is not obvious, (2) an employer is required by another federal law to obtain medical information or is voluntarily using the information obtained to benefit individuals with disabilities or (3) an employer offers voluntary “wellness” programs aimed at identifying and treating common health problems, such as high blood pressure and cholesterol. The guidance provides that if an employer believes that an employee is having performance problems because of a medical condition, but the employee will not answer any questions or go to a doctor, the employer may discipline the employee for his or her performance problems as with any other employee having similar performance problems. Although the EEOC enforcement guidance does not contain new information, it does provide employers with assistance on whether their inquiries about an employee’s medical condition during employment might violate ADA.

"Good health is merely the slowest possible rate at which one can die"

2. 2000 WORST YEAR FOR LIABILITIES OUTPACING ASSETS: According to a front page story in Pensions & Investments, last year liabilities outpaced assets by the biggest ratio ever. Pension fund asset growth trailed liability growth by 26%, the largest negative asset-to-liability ratio ever. The year before’s greatest positive asset-to-liability ratio, also 26%, has been wiped out. The last time liabilities outgrew assets was 1995, when the spread was 12 percentage points. The dramatic swing from 1999 to 2000 can be traced to falling interest rates driving up the value of future liabilities and poor performance of investments. But all news is not bad: because of strong market performance in recent years, pension fund asset growth has outstripped liability growth by 7.5% over the last thirteen years.

3. SEC WARNS COMPANIES TO EXPLAIN ORIGIN OF EARNINGS: For the second year in a row the Securities and Exchange Commission has told companies that they must spell out to investors the extent to which their earnings have come from their pension funds instead of profits on operations. The warning comes just in time for the 2000 annual report season. Remember that many large companies’ returns on pension plan assets constitute a substantial percentage of operating income (see C&C Newsletter for October, 2000, Item 8). Meanwhile, some of the nation’s largest corporations could see their pension income start shrinking at the end of this year. The reason: 2000 is when most companies reach the end of a 15-year period they were allowed to write off the differences between their pension assets and their pension liabilities after adopting Financial Accounting Standard 87.

4. S&P MOVES STOCKS FROM GROWTH TO VALUE: Last month Standard & Poor’s Corp. balanced the S&P/BARRA Growth and Value Indexes, resulting in the movement of approximately twenty growth index stocks to value indexes. Although the Russell 1000 Growth Index will not rebalance until mid-year, several of the stocks are also included in the Russell 1000 Growth Index. Some prominent growth names shifting to value include Nortel Networks Corp., JDS Uniphase Corp. and Computer Associates International, according to a brief report in Pensions & Investments.

5. FIREFIGHTER WIDOWS SPARED PENSION CUT: Twenty-five widows of Chicago firefighters who died in line of duty will not have their pension benefits cut almost in half, after the City Council agreed to exempt them from the effects of a 63 retirement age. The action came one day after a bill that would have preserved the widows’ benefits died in the Illinois General Assembly. Widows whose husbands would have reached the age of 63, had they lived, learned their benefits would be sharply reduced: they would have been cut from 75% of salary assigned to the decedent’s rank at time of death to 40%. The first cut was reflected in the January 1, 2000 checks. However, the City has promised retroactively to restore any cuts. The change also applies to forty-six other fire department widows whose benefits were reduced the last time the City required police officers and firefighters to retire at age 63 (see C&C Newsletter for October, 2000, Item 10).

“Stupidity got us into this mess -- why can't it get us out?”

6. CLINTON PENSION NOT WORTH SIX MILLION DOLLARS...HOW ABOUT 7.3 MILLION DOLLARS?: Our prediction that President Clinton’s pension could be worth about $6 million (see C&C Newsletter for December, 1998, Item 4) may have been on the light side. At age 54 and with a life expectancy to age 82, former President Clinton’s annual check will be more than $161,000.00, according to the National Taxpayers Union. Because George W. Bush at age 54 would be older when he leaves office, his projected lifetime pension payout after a single four-year term is a measly $6.6 million. (A related fact we did not know: because of Congressional action last year, Bush’s annual salary will be $400,000.00, double Clinton’s.) And former Vice President Al Gore may not be such a loser: his pension is estimated to total $5.6 million. While we are on the subject, here are the estimated lifetime pensions of our living ex-Presidents:

Gerald Ford - $4.5 Million
Jimmy Carter - $4.3 Million
George Bush - $3.1 Million
Ronald Reagan - $2.6 Million

“After any salary raise, you will have less money at the end of the month than you did before”

7. BEST EXECUTION CONCERNS AND CLARIFICATIONS: John Gentile, a broker-dealer consultant, recently wrote a short article concerning two of the most common questions raised in the securities industry: (1) what is best execution and (2) how can a broker-dealer demonstrate, to its customers and to regulators, that it provided best execution? In its study entitled Market 2000: An Examination of Current Equity Market Developments, the SEC noted that “when an agent acts on behalf of a customer in a transaction, the agent is under a duty to exercise reasonable care to obtain the most advantageous terms for the customer. This common law agency principle has been incorporated into case law and SEC decisions under the federal securities laws.” However, the best possible price for the customer is only one of a number of factors to be considered. The same study states that “what has been required is that the broker endeavor, using due diligence, to obtain the best execution possible given all facts and circumstances.” Such additional facts or circumstances, include but are not limited to:

  • Size of the order, which has implications involving speed of execution (that is, larger orders may take longer to execute)
  • Price improvement
  • Trading characteristics of the security involved
  • Availability of accurate information affecting choices as to the most favorable market in which execution is sought
  • Availability of technological aids to process data
  • Availability of competing markets
  • Cost and difficulty associated with achieving an execution in a particular market

Inasmuch as regulators are asking brokers to demonstrate that customers are receiving best execution, firms can do the following:

  • Review (and, if necessary, amend) written supervisory policies and procedures regarding best execution obligations. As part of the process, firms should revisit NASD Notice to Members 98-96, which requires that such policies and procedures specifically identify persons responsible for supervision; note steps and reviews undertaken by the appropriate supervisor; comment on frequency of such reviews; and state how reviews will be conducted.
  • Select a sample of trades, on a monthly or quarterly basis, for best execution analyses. Such analyses take into account a number of factors, of which the most significant include executions within/outside the National Best Bid/Offer (NBBO), price improvement and order size (liquidity) improvement. (Perhaps the most telling gauge in reviewing best execution is the percentage of trades executed outside the NBBO that were unfavorable to the customer. For these trades, firms should document and be able to explain why the trade was executed outside of the NBBO.)
  • Conduct ongoing education of traders with respect to best execution responsibilities and relevant rules.
  • Review all order-handling and execution systems for compliance with NASD Notice to Members 97-57, which covers the NASD’s interpretation of the SEC’s order-handling rules and provides specific examples of compliance with the NASD’s limit order protection rules and best execution obligations.

“Two wrongs are only the beginning”

8. CPRS RIPS AARP REPORT, AUTHOR: Terming it a “stealth” report, the Coalition to Preserve Retirement Security has criticized the American Association for Retired Persons’ report on the impact of mandatory Social Security coverage of state and local workers (see C&C Newsletter for November, 2000, Item 11). Our readers know that CPRS was created by public pension plans to fight legislative proposals that would require newly-hired state and local government employees to join the Social Security System (see C&C Newsletter for September, 1998, Item 20). CPRS says that report author Alicia Munnell was chosen to investigate validity of a study by The Segal Company that mandatory coverage would cost $26 Billion. However, “Munnell didn’t comment on the Segal study’s validity and she did not challenge it. Her report and the AARP’s own position can be summed up with one very simple statement from the report, ‘Mandating coverage for all State and local employees will help Social Security.’” The Coalition also states that in seeking bidders for the research job that resulted in Munnell’s report, AARP asked that researchers pay “special examining certain States because...they have large constituencies prepared to contest mandatory coverage - for example, California, Texas, Ohio, Massachusetts, Florida and Michigan.” Finally, the rebuttal contends that Munnell is a controversial figure who has backed away from some of her work in the past after it was criticized by colleagues, and was called an “extremist” by Senate Majority Leader Trent Lott. Think about that.

9. SORRY ABOUT YOUR INDEX FUNDS: In a two-part Internet piece, Greg Hanna writes about the minuses and pluses of index funds. Part 1, “Are Index Funds Dead?:” Last year stock pickers earned their keep. More than two-thirds of actively managed stock funds outperformed the S&P 500 in 2000. But these immensely popular index funds should not be pronounced DOA. The S&P 500 Index turned in a dismal minus 8.6 return in 2000 after five straight years of double digit increases. More than 60% of all stock funds posted negative returns in 2000, so beating the S&P 500 didn’t necessarily mean a “good” return. However, 2000 was a good reminder that equity investments, including index funds, are particularly volatile in the short-term. But in the long term, more often than not, index funds have prevailed. Over the last thirty years, the S&P 500 has outperformed more than 65% of all managed growth and income funds. Part 2, “Advantages of Index Funds:” Consistency - nobody can predict when the market will rise or fall. Index funds stay fully invested in their respective equities, so they don’t miss out on market swings up or down. With their inherent consistency in investment holdings, index funds have had positive returns as a result. Stability - although portfolio managers are paid to analyze investments and choose those that will perform well given current and future economic conditions, none have been able consistently to predict the market. Lagging performance results in replacement of managers and underlying style changes, translating into turnover. Index funds, by definition, consistently keep the same investment mix from year to year, and changes in fund managers rarely impact ultimate performance. Lower expenses - every time a portfolio manager buys or sells an investment, the fund incurs transaction costs. The more turnover, the higher the transaction costs. Of course, investors pay these costs, resulting in reduced net returns. Naturally, an index fund stays fully invested and makes fewer trades, translating into lower expenses, allowing investors to get a bigger piece of the return. From what we can tell, Hanna has been writing positively about index funds for several years.

“It hurts to be on the cutting edge”

10. FEMALE POLICE OFFICER FAILS TO ESTABLISH DISCRIMINATORY INTENT: The City of Coral Gables has been granted summary judgment in a discrimination case filed by a female police officer. She claimed discrimination based upon her gender. Claims for discrimination based on disparate treatment require proof of discriminatory intent on the part of defendant. A plaintiff may establish discriminatory intent through direct, statistical or circumstantial evidence. Direct evidence is evidence that establishes the existence of discriminatory intent beyond the employment decision without any inference or presumption. Statistical evidence must amount to something more than anecdotal observations. And to establish a case of disparate treatment through circumstantial evidence requires a plaintiff to show (1) that she is a member of a protected class, (2) that she was qualified for the position, (3) that she was subjected to adverse employment action and(4) that her employer treated similarly situated employees outside the class more favorably. Incidentally, the City Manager’s statement that plaintiff should act more “lady-like” was a stray remark not constituting direct evidence of discrimination. Miller v. City of Coral Gables, 14 Fla. L. Weekly Fed. D90 (S.D. Fla., October 3, 2000).

11. DISCHARGED EMPLOYEE MUST EXHAUST ESTABLISHED PROCESS TO RESOLVE DISPUTES BEFORE SUING: A former patrol officer brought suit against a city for terminating him allegedly without due process. Concluding that the officer had not fully pursued and exhausted extrajudicial grievance procedures, the court granted defendant’s motion for summary judgment. The court did recognize two exceptions to the general rule, neither of which was applicable: (1) where a union having sole power to invoke grievance procedures wrongfully refuses to do so in behalf of the employee and (2) where exhaustion of extrajudicial remedies would be futile. One interesting aspect of the case: although the collective bargaining agreement provided for a one-year probationary period, during which dismissal would afford no recourse to grievance and arbitration procedures, the officer’s probationary period was extended. The agreement did not contain a provision expressly permitting an extension of the probation period or expressly prohibiting it. The officer was terminated during the “extended” probationary period, and challenged the extension in court but abandoned that claim. Human v. City of Cocoa, 14 Fla. L. Weekly Fed. D94 (M.D. Fla., October 25, 2000). To Err Is Human.

“Who can I blame for my own problems? Give me just a minute ... I'll find someone”

12. MUNICIPAL RETIREMENT PLAN BENEFIT ESCAPES CLAIM IN BANKRUPTCY: The Bankruptcy Code generally provides that all of a bankrupt debtor’s property interests are to be turned over to the trustee in bankruptcy for the benefit of creditors. However, “a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable.” Debtor had a beneficial interest in assets held by trustees of a municipal employees’ retirement plan, the terms of which had been effectively incorporated into the city charter. The plan provided that the debtor’s interest is “unassignable” and not subject to execution, attachment or operation of bankruptcy law. The inquiry to be made under the cited exception has three parts: First, does the debtor have a beneficial interest in a trust? Second, is there a restriction on the transfer of that interest? Third, is the restriction enforceable under nonbankruptcy law? The first two issues were undisputed. The bankruptcy court and the United States District Court dismissed the retirement system’s argument that the restriction on alienation is enforceable, because the defined contribution plan is funded solely through voluntary contributions of city employees. However, the United States Court of Appeals found conflict with a ruling of the United States Supreme Court that left no room for doubt that a debtor may exclude from property of the bankruptcy estate any interest in a plan or trust that contains a transfer restriction enforceable under any relevant nonbankruptcy law. Incidentally, the debtor had borrowed money from the municipal credit union, pledging his interest in the plan as collateral for the loan (despite the anti-assignment provision of the plan) -- “in keeping with what appears to have been a common practice.” Taunt v. General Retirement System of the City of Detroit, Case No. 99-1726 (6th Cir., November 13, 2000).


AGO 2000-64 (November 13, 2000):

A. Section 112.533(2)(a), Florida Statutes, as amended, which provides that the officer who is the subject of a complaint may review all statements, regardless of form, made by the complainant and witnesses immediately prior to the beginning of the investigative interview, does not prescribe the order in which interviews during the investigation must be conducted. Thus a policy whereby the officer is interviewed first would not violate this subsection.
B. Section 112.533, Florida Statutes, applies to the receipt and processing of all complaints by any person, whether within or outside the agency.

AGO 2000-66 (November 17, 2000):

The confidentiality provisions of Section 112.533, Florida Statutes, do not exempt an inactive criminal investigative file from inspection and copying pursuant to Section 119.07, Florida Statutes, while an active internal affairs investigation is pending concerning the same complaint.

AGO 2000-68 (November 17, 2000):

It is not a violation of the Government in the Sunshine Law for elected city commissioners to attend other city board meetings and comment on agenda items that may subsequently come before the commission for final action. However, the city commissioners in attendance at such meetings may not engage in a discussion or debate about these issues among themselves.

14. FLORIDA WORKERS’ COMP ACT NOT PREEMPTED BY ADA: The Florida First District Court of Appeal has previously determined that Section 440.02(1), Florida Statutes, is not preempted by Title I of the Americans with Disabilities Act (42 U.S.C. §§12111-12117) (see C&C Newsletter for February, 1997, Page 3). That section of the Florida Workers’ Compensation Act is also not preempted by Title II of ADA (42 U.S.C. §§12131-12165). Here, the Judge of Compensation Claims found that claimant’s undisputed need for bilateral hip replacements was caused, at least in part, by habitual use of alcohol. Section 440.02(1), Florida Statutes, provides that disability or death due to the accidental acceleration or aggravation of a disease due to habitual use of alcohol is not an injury by accident arising out of the employment. The First District Court of Appeal affirmed denial of the benefits. Herrera v. Atlantic Interior Construction, 25 Fla. L. Weekly D2745 (Fla. 1st DCA, December 1, 2000).

“Since I gave up hope I feel much better”

15. “TRAVELING EMPLOYEES” STATUTE IS EXCEPTION TO “GOING OR COMING” RULE: Section 440.092(2), Florida Statutes, the so-called going or coming rule, provides that any injury suffered while going to or coming from work is not an injury arising out of and in the course of employment whether or not the employer provided transportation if such means of transportation was available for the exclusive personal use by the employee, unless the employee was engaged in a special errand or mission for the employer. Section 440.092(4), Florida Statutes, entitled “Traveling Employees,” provides that an employee who is required to travel in connection with his or her employment who suffers an injury while in travel status shall be eligible for benefits only if the injury arises out of and in the course of employment while he or she is actively engaged in the duties of employment. This subsection applies to travel necessarily incident to performance of the employee’s job responsibility but does not include travel to and from work as provided in subsection (2). The Judge of Compensation Claims concluded that a traveling employee is only exempt from the going or coming rule while traveling between two places of employment. Finding that the traveling employees statute is an explicit statutory exception to the going or coming rule, the First District Court of Appeal reversed: “We decline to construe the traveling employee statute to allow a going-and-coming exception that would abrogate workers’ compensation coverage in every case once the employee begins travel home, no matter how long or hazardous the route, and no matter whether the employee has been compensated for the travel.” McCormick v. State of Florida, 25 Fla. L. Weekly D2861 (Fla. 1st DCA, December 12, 2000).

16. FLORIDA CODE OF ETHICS AMENDED: Effective January 1, 2001, Chapter 00-244 amends Chapter 112, Part III, Florida Statutes, the Code of Ethics for Public Officers and Employees. Section 112.3145, Florida Statutes, is amended to include within the definition of “local officer” any appointed member of a pension board or retirement board having the power to invest pension or retirement funds or the power to make a binding determination of one’s entitlement to or amount of a pension or other retirement benefit. As the Attorney General long ago held that any member of a pension board or retirement board is a local officer for Chapter 112 purposes, we assume the amendment is a codification rather than a retreat, so that elected members are still included. Also, each person required to file full and public disclosure of financial interests shall file a final disclosure statement within 60 days after leaving his or her public position for the period between January 1 of the year in which the person leaves and the last day of office or employment, unless within the 60-day period the person takes another public position requiring financial disclosure or is otherwise required to file full and public disclosure for the final disclosure period. Any person not filing an annual financial disclosure form (due July 1) by September 1 is subject to a fine of $25.00 per day for each day late up to a maximum of $1,500.00; but this limitation on automatic fines does not limit the civil penalty that may be imposed as otherwise provided by law. Finally, there is an important amendment to Section 112.312, Florida Statutes: (1) consideration that might otherwise be given to avoid a “gift” must be given within 90 days, thus preventing the contention that “it was not a gift -- I intended to pay for it;” (2) the term “consideration” does not include a promise to pay or otherwise provide something of value unless the promise is in writing and enforceable through the courts, thus preventing the contention “I intended to pay for it but forgot to execute a promissory note.”

“I doubt, therefore I might be”

17. SOCIAL SECURITY DISABILITY PROCEEDINGS ARE NOT ADVERSARIAL: Relying upon a 30-year-old decision of the United States Supreme Court, the U.S. Court of Appeals held that Social Security Disability Proceedings are inquisitorial rather than adversarial. The Social Security Administration is perhaps the best example of an agency that is not based to a significant extent on the judicial model of decisionmaking. It has replaced normal adversary procedure with an investigatory model, where it is the duty of the Administrative Law Judge to investigate the facts and develop the arguments both for and against granting benefits; review by the Appeals Council is similarly broad. The regulations also make the nature of SSA proceedings quite clear. They expressly provide that SSA “conducts the administrative review process in an informal, nonadversary manner.” The Commissioner has no representative before the ALJ to oppose the claim for benefits; neither is there any indication that he opposes claimants before the Appeals Council. In this case, the Court of Appeals held that an employer and its workers’ compensation insurance carrier were not entitled to intervene in a claimant’s Social Security disability case even though they contended that, without their presence in the federal forum, claimant could receive a finding of “catastrophic injury” from the ALJ, which ruling could in turn be relied upon by the Florida Judge of Compensation Claims to support an award of permanent total disability benefits in the state forum, payable by them to claimant, perhaps for the rest of her life. Incidentally, in the state workers’ compensation proceedings, the JCC applied Social Security standards yet made her own independent findings, in accordance with Florida case law (see C&C Newsletter for April, 2000, Item 11). Crawford & Company v. Apfel, 14 Fla. L. Weekly Fed. C257 (U.S. 11th Cir., December 14, 2000).

18. FLORIDA SUPREME COURT DECISION IN ACKER RETROACTIVE: Following traditional tests to determine whether judicial construction of a statute is given retroactive as well as prospective application, the Florida First District Court of Appeal has held that the Supreme Court of Florida’s decision in Acker v. City of Clearwater, 755 So.2d 597 (Fla. 1999), (see C&C Newsletter for December, 1999, Item 1), should be applied retroactively. Generally, judicial construction of a statute is given retroactive as well as prospective application, except where the court that rendered the decision limits it to prospective effect or where the statute was given the overruled construction by a court of last resort “and property or contract rights have been acquired under and in accordance with such [overruled] construction” -- not the case here. Basically, Acker held that where an employer/carrier takes a workers’ compensation offset under Section 440.20(15), Florida Statutes, and initially includes supplemental benefits paid under Section 440.15(1)(e)(1), Florida Statutes, the employer/carrier is not entitled to recalculate the offset amount to include increases in supplemental benefits. State of Florida v. McGrath, 25 Fla. L. Weekly D2865 (Fla. 1st DCA, December 15, 2000).

“My opinions have changed, but not the fact that I am right”

19. IN SOCIAL SECURITY DISABILITY PROCEEDINGS, TREATING PHYSICIAN DETERMINATION ENTITLED TO CONTROLLING WEIGHT: The law of the Eleventh Circuit U.S. Court of Appeals (comprising Alabama, Georgia and Florida) is that the testimony of a treating physician must be given substantial or considerable weight unless “good cause” is shown to the contrary. In Social Security disability proceedings, the Commissioner’s regulations require as follows: “Generally, we give more weight to opinions from your treating sources, since these sources are likely to be the medical professionals most able to provide a detailed, longitudinal picture of your medical impairment(s) and may bring a unique perspective to the medical evidence that cannot be obtained from the objective medical findings alone or from reports of individual examinations, such as consultive examinations or brief hospitalizations.” The Administrative Law Judge must clearly articulate the reasons for giving less weight to the opinion of a treating physician, and the failure to do so is reversible error. In the case sub judice, claimant suffered from, among other things, fibromyalgia, the diagnosis of which depends mostly on a person’s report of complaints and feelings (symptoms) (see C&C Newsletter for September, 2000, Item 11). Thus, a treating physician’s determination that a patient is disabled due to fibromyalgia is even more valuable because there are no objective signs of severity and the physician must interpret the data for the reader. Stewart v. Apfel, 14 Fla. L. Weekly Fed. C279 (U.S. 11th Cir., December 20, 2000).

20. THE FLORIDA TEST FOR ADDRESSING AN UNFAIR LABOR PRACTICE CHARGE: Almost twenty-five years ago, the First District Court of Appeal announced the following test for addressing an unfair labor practice charge:

In order to determine whether the evidence sustains a charge alleging an unfair labor practice, when it is grounded upon an asserted violation of protected activity, the following general principles should be considered by the hearing officer and by the Public Employees Relations Commission:
(1) In any such proceeding the burden is upon the claimant to present proof by a preponderance of the evidence that (a) his conduct was protected and (b) his conduct was a substantial or motivating factor in the decision taken against him by the employer.
(2) If the hearing officer determines the decision of the employer was motivated by a non-permissible reason, the burden shifts to the employer to show by a preponderance of the evidence that notwithstanding the existence of factors relating to protected activity, it would have made the same decision affecting the employee anyway.

In the case at bar, the hearing officer concluded that the city produced no evidence with regard to the second prong and that the city had violated the law by dismissing officers for engaging in protected, concerted activities on behalf of the Palm Beach County Police Benevolent Association. Thus, PERC erred in remanding the case to the hearing officer, because his findings of fact were supported by competent substantial evidence and he applied the correct law. Palm Beach County Benevolent Association, Inc. v. City of Riviera Beach, 26 Fla. L. Weekly D209 (Fla. 1st DCA, January 10, 2001).

“A person who smiles in the face of adversity...probably has a scapegoat”

21. TIME FOR A NEW INDEX?: Echoing something we reported on last month (see C&C Newsletter for December, 2000, Item 5), in an editorial entitled “Time to Update Indexes,” Pensions & Investments suggests that it may be time for a new stock index -- one that will give a better picture than the current indexes do of how the average investor, or the average portfolio, is doing in the market at any point in time. The piece recognizes that the usual suspects, Dow Jones Industrial Average and Standard & Poor’s 500 included, are not completely satisfactory, in part because most are capitalization weighted (some total and others float-adjusted). So, when the technology sector accounts for just 7% of the gross domestic product but represents 36% of the S&P 500, the index shows a total return for 1999 of 21% compared to the median money manager in P&I’s universe, 18.2%. Obviously, most of the S&P 500 gain was accounted for by just a few stocks in the index; only about half of the stocks in the index were up or flat in 1999. The index that P&I proposes is complicated, dealing with GDP and market sector weight. Suffice it to say, however, the index, devised by Ken Safian, as calculated for 1997-1999, is very close to the returns achieved by the median money manager, which is what it’s all about.

22. PENSION FUNDS PLAY IMPORTANT ROLE IN SECURITIES CLASS ACTION SETTLEMENT: When we said pension boards should consider “investing in lawsuits,” we really meant it (see C&C Newsletter for November, 2000, Item 1). In an Op-Ed piece in Pensions & Investments, the writer reveals how the Louisiana State Employees’ Retirement System and the Louisiana Municipal Police Employee’s Retirement System played an important role in a $259 million cash settlement against 3Com Corp. As lead plaintiffs, the billion-dollar funds played an active role, participating in multiple mediation sessions that ultimately resulted in the settlement. That the lead plaintiffs had a large stake in the outcome gave additional impetus to the resolution. The lesson of this litigation, which involved 3Com’s acquisition of U.S. Robotics Corp., is that a company can violate the Securities Laws if it does not make full and fair disclosures, even if it satisfies technical requirements but presents a distorted picture of its financial performance and condition.

23. FLORIDA PICKS TPA FINALISTS: Following enactment of legislation adding a 401k-type pension plan to the Florida Retirement System (see C&C Newsletter for October, 2000, Item 12 and C&C Newsletter for July, 2000, Item 5), the Florida State Board of Administration named three finalists in its search for a third-party administrator: CitiStreet, Fidelity Investments and Northern Trust. By the time this Newsletter hits the streets, the SBA may have already made a final decision. Stay tuned.

“A clear conscience is usually the sign of a bad memory”

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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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