Pension Fraud: Other States Crack Down

Thursday, November 18, 2010


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While in Rhode Island the state’s chief investigator has found no cases of pension fraud in nine years, three other Northeastern states seem to be more successful in finding abuse.

The three states—Massachusetts, Connecticut, and New Jersey—each have a special unit with several investigators checking into alleged cases of fraud and other wrongdoing, spokesmen for those state pension systems told GoLocalProv.

“It’s an ongoing part of the operation,” said Bill Quinn, a spokesman for New Jersey Department of the Treasury. “They (the state) consider it an important part of running a well-managed pension (system).”

In New Jersey in the past year, the three-person External Audit Unit has uncovered a “number of instances” in which a retiree took a pension and resumed work, according to Quinn. “There are cases where people are coming right back to work and they have made a pre-arrangement with their employer to do that,” Quinn told GoLocalProv.

In Connecticut, the three investigators for the state pension system handle about three to five cases of fraud each year, according to Bill Jensen, a spokesman for the state Comptroller.

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Rhode Island: One Dozen Investigations, Zero Convictions

Rhode Island, meanwhile, has just one field investigator for pension fraud, Salvatore Lombardi. In nine years, Lombardi has handled only 12 investigations. In ten of the cases he turned up no evidence of wrongdoing. The other two, which involve disability pensions, are pending, according to local state officials. Lombardi himself is on a disability pension—through the City of Woonsocket, where he served as a police officer in the 1980s.

There’s been at least one high-profile case of pension abuse in Connecticut this year. In July, the state revoked the disability pension for a 39-year-old correction officer after the Medical Examination Board for Disability Retirement learned that she had been competed in BMX bicycle races and martial arts events—in addition to working as a volunteer firefighter and EMT.

Disability Pension Abuse in Connecticut

Like Connecticut, Massachusetts has a Fraud Prevention Unit, with two staff members and a consultant, according to Mike DeVito, a spokesman for the Public Employment Retirement Administration Commission, or PERAC. The unit has its own Web page, complete with a listing of the kinds of fraud it investigates and downloadable forms for citizens to report suspected cases. DeVito did not know how many cases the unit investigates on a regular basis.

Massachusetts does have a considerably larger population than Rhode Island, which is reflected in the greater number of retirees it has in its pension system, which is 86,000. Rhode Island has under 30,000 retirees. Connecticut has 42,000 retirees while New Jersey has more than 252,000.

Two other states contacted by GoLocalProv do not have dedicated pension investigators and say fraud and abuse are not issues they face—Delaware and Maine.

New Jersey has 'External Audit Unit'

Of the three states with investigative units, New Jersey is especially active. In addition to cases of retirees collecting salaries and pensions, Quinn said the External Audit Unit has been busy enforcing a three-year-old law that bars private attorneys and civil engineers who have contracts with cities from entering the public pensions system.

Another major area of abuse is in disability pensions. New Jersey, like many other states, has limits on how much someone on a disability benefit can earn from another job. Those who break the rules must pay back part of their pension or face mandatory deductions from their benefits in the future, according to Quinn.

He said the pension auditors have their hands full with cases. “It gives them a really wide area to cover,” Quinn said.



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