Pension Fraud—Who’s to Blame?
Wednesday, May 11, 2011
Nearly two decades ago, the City of Providence had the chance to crack down on alleged pension abuse and fraud—and passed.
The year was 1992 and disability pensions among Providence firefighters had soared to extraordinary levels. Between 1988 and 1991, about 8 out of every 10 firefighters who retired went out on a disability and 90 percent of those who applied for pensions in 1992 received the tax-free disability pensions.
Now, more than 15 years later, Public Safety Commissioner Steven Pare has called for an investigation into the accidental disability pensions that firefighters received between 1990 and 2005—in the wake of a news report about a disabled retiree who was caught on camera lifting weights.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBut problems in the city retirement system did not go unnoticed by city officials in the early 1990s.
Alarmed over the high rate of disability pensions, one city councilman, Robert Clarkin, accused retired firefighters of claiming “phony injuries.” He compared the union-dominated Retirement Board that approved their disability pensions to a “candy store” and said retirees were “raping” taxpayers, according to Providence Journal news reports at the time.
Clarkin vowed an investigation.
Unions resisted city council investigation
What followed was a years-long, high-stakes protracted battle that was waged in the legal arena as well as the court of public opinion.
In the fall of 1992, at the behest of Clarkin and other members, the City Council formed a special committee to review the records of firefighters on disability pensions. When the Retirement Board balked at turning over the records, the City Council armed the committee with the power to subpoena records. City retirees took the issue to court, winning a temporary restraining order.
One of Clarkin’s opponents, firefighter union president Stephen Day, told GoLocalProv last night that he was not against stopping abuse. At the time, he said he personally promised to strip away a disability pension from anyone who was abusing the system. He said he had objected to Clarkin’s suggestion that there was widespread fraud. “He just broad-brushed everybody,” Day said.
It took two years, but finally, in early 1994, the state Supreme Court said the City Council could take a peek at the medical records of disabled retirees.
But after all that, the pension wars came to a draw. In 1995, Clarkin held off on further probes into the Fire Department after union officials promised to rein in disability pensions, according to a Providence Journal account.
“They never brought me one case. They never brought me one pension abuser,” said Day, who also served on the Retirement Board. “It was just huffing and puffing.”
Who’s to blame?
Former Councilman: Everybody Is to Blame
Now, a little over 15 years later, who deserves blame for failing to address the problem?
Former City Councilman Joe DeLuca said the city needed—and did not get—sweeping pension reform. “We haven’t been successful in doing that because we don’t have the guts that it takes,” DeLuca told GoLocalProv.
Another former councilman, John Lombardi, said that the city needs willpower to achieve pension reform. He noted that today, both the city administration and the head of the Providence firefighters unions back a proposed review of disability pensions. But he declined to say who exactly lacked the necessary willpower to make it happen 15 years ago.
DeLuca, on the other hand, said there is plenty of blame to go around. “The blame is on everybody—unions, former administrations that for selfish reasons agreed to unreasonable terms because they’re not paying for it,” DeLuca said.
Mayors: It’s the Unions
Not so fast, said former Mayors Joe Paolino and Buddy Cianci, who served in office in the years in which disability pensions reached their peak. “You can’t hang that on me or Paolino,” Cianci told GoLocalProv. “You got to hang that on the Legislature. We fought it tooth and nail.”
The Legislature, Cianci added, was influenced by the unions. “The Legislature gave them every kind of benefit you could imagine,” Cianci said. “They said, for instance, that anyone who had high blood pressure could get a disability pension. … It didn’t have to be proved. It was just assumed.”
He said the city did its best to make its case in the General Assembly—to no avail. “They overran us,” he said. “They were like Grant and we were like Richmond.”
Paolino also faulted the union-controlled Retirement Board. Of the 11 members, the city controlled five, while six members represented unions. After the board granted compounded cost of living adjustments, or COLAs, to retirees, Paolino said he launched an unsuccessful court battle to stop what he said one city official had described as a raid on the pension system.
But ultimately, the ones who should be blamed, Paolino said, are the “individuals who abuse the system.”
Union leader welcomes probe, but not blame
Paul Doughty, the current president of the city firefighters union, supports the current effort to review the disability pensions. “If you’re not disabled and you’re gaming the system, no one wants you off the system more than the active guys,” Doughty told GoLocalProv.
But he took exception to blaming the unions for not addressing the problem earlier. “Certainly the unions didn’t control the City Council or the Mayor’s office. We’ve become a convenient bogeyman for every wrong and every ill. While in some cases we may have played a part I think it’s patently unfair to paint the unions as the culprit in this case,” Doughty said.
As for the claim about the General Assembly, Doughty replied: “Does that pass the laugh test?”
“The General Assembly runs the General Assembly,” he added. “They may listen to the unions, but there’s a big difference there.”
Former union head: Understaffing caused more disabilities
Day turns the blame back on the administrations of Paolino and Cianci. He says it’s no coincidence that the high number of disability pensions came at a time when he says the city was understaffing the Fire Department—putting four firefighters on a ladder truck, when there should have been five, and three firefighters on a fire engine when there should have been four.
He said low staffing causes firefighters on the scene of a fire to do the jobs of two people, leading to more severe injuries.
After the city adopted minimum staffing standards, Day said it had to pension out a large number of injured firefighters to make room for new hires. That, he said, explains the sudden increase in disability pensions in the early 1990s.
One key reform—shakeup in the retirement board
Although a full-fledged investigation into the disability pensions never materialized, former city officials point to one key reform that was successful—an overhaul in the membership of the retirement board, which shifted the balance of power from the unions to the city administration.
That came toward the end of the Cianci administration—after the former mayor had already stripped the board of one of its powers, handing over management of the pension fund to the city investment commission.
Day says he opposed both reforms because he did not trust the city with the management of the pension fund. He accused past administrations of not making the required annual contributions to the fund and actually borrowing money from it. That mismanagement, he said, and not the compound COLAs, is what has fueled the large unfunded liability in the pension system.
“They strip-mined it and they want to turn it and blame everybody,” Day said.
The city has since instituted other reforms as well. For example, in the early 1990s, a retiree who sought a disability pension had to have his medical records reviewed by three city-approved doctors. Two out of the three had to agree that he was disabled. Now, three out of three have sign off on it.
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Editor's Note: Clarkin could not be reached for comment. Also, former City Councilman Josh Fenton, who was a member of the council's Committee on the Employment Retirement Board and System, is a co-founder of GoLocalProv.com.
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