Friday, April 11, 2014
The MBTA Retirement Fund’s management has been aggressively spending taxpayers’ and retirees’ money to fend off attempts by the media and the Legislature to shine a light on its books. And the reason is becoming all too obvious.
Earlier this year, senior executives testified before the Legislature’s Joint Committee on Public Service that the fund is not a public entity and exists for the sole benefit of current and future retirees. Hence, they say, it should not be subject to public oversight.
Looking to find an amicable solution, legislators patiently kept asking what information the retirement board is trying to protect. They received no clear answer.
The board’s actions strongly suggest that it is not the privacy of individual retirees that is at stake. Their pensions were the very first piece of information made public last year, well before the fund disclosed even a shred of data on its financial situation and months before it recognized a hedge-fund loss that it had known about for at least two years.
The truth is that for far too long, the scandal-ridden fund has been run as the personal fiefdom of its managers and board members, some of whom are simultaneously collecting large salaries and generous pensions.
In 2005, Michael Mulhern retired as the T’s general manager at age 46 to take the helm of the MBTA Retirement Fund. He had started as a bus driver at the T and had no investment experience to speak of. By 2007, he was reportedly being paid $225,000 annually. According to data released to the Herald last year, Mulhern also receives a pension of nearly $65,000.
Deputy Director John Barry retired in 2006 as an MBTA rail repairer. In addition to his current job, which reportedly paid him $150,000 in 2007, he also draws a pension of $46,000. Like Mulhern, Barry had been a retirement board member before landing his lucrative position running the fund. Does anyone see a pattern here?
When Mulhern took over, the fund had about 98 percent of the money needed to pay retirees’ pensions. By 2012, that was down to 68 percent. Adding insult to injury, management covered up the loss of $25 million it “invested” in what was basically a Ponzi scheme. Now the retirement board is spending hundreds of thousands of tax dollars on lawyers, public relations gurus and lobbyists to deny retirees, legislators and the media a clear view of the fund’s inner workings.
The MBTA Pension Fund’s governance has been broken for years and it’s time to start fresh by replacing its management, which is morally and ethically bankrupt. Unless we demand their resignations, the fund will soon be financially bankrupt as well.
Iliya Atanasov is ?senior fellow on finance at the Pioneer Institute, a Boston-based think tank.
Read it here.