County Asked For Pension Changes Months After Loss
Months after a pension investment backed by subprime mortgages went bust, Baltimore County officials asked the County Council to pass changes to pension regulations barring those same types of investments.
County Budget Director Keith Dorsey asked the council to approve the changes in January 2008—months after a $21 million investment in Mainsail II LLC failed to pay off as expected.
Still unclear is whether or not the council was informed of the failed investment at the time that they were being asked for the changes.
There are no news reports citing a failed investment from the time.
There are also no minutes from the meeting that shed light on Dorsey's testimony. The council ultimately passed the resolution on Jan. 22, 2008.
County Executive Kevin Kamenetz was chairman of the council at the time. Don Mohler, a spokesman and chief of staff to Kamenetz, declined to comment on the issue and said the county executive would not answer questions about his recollections of that 2008 meeting because of pending litigation.
One key section of the regulations bars the county from directly purchasing investments that include "asset-backed paper, commercial paper with a final maturity date that is extendible at the option of the issuer, and derivative investments," according to sources who spoke to Patch on condition of anonymity because they were not authorized to speak about the failed investment.
Another key provision is the creation of an investment board made up of Dorsey, County Administrative Officer Fred Homan, county Investment Administrator Robert Burrows and a contractual financial adviser. Sources say the new committee was created in order to provide the type of oversight that was previously missing that may have allowed the bad investment to occur in the first place.
Dorsey and other county officials met in secret Monday with four members of the Baltimore County Council to discuss the Mainsail II LLC investment and a possible lawsuit against Merrill Lynch, the company that sold the investment to the county.
The meeting was not previously announced to the public and council members and county officials who attended have all declined to speak about the subject citing attorney-client privilege.
The issue resurfaced this week after the county asked the council to approve a contract to hire outside counsel to pursue legal action against Merrill Lynch. The county asked for quick passage of the contract citing an impending statute of limitations deadline.
The fund is already the subject of a federal lawsuit brought in 2010 by King County, WA.
jake garmel
5:39 pm on Thursday, April 19, 2012
Wow. So Mohler won't comment given "pending litigation". Exactly what litigation would that be...how idiotic...the secret meeting was for the purpose of hiring a lawyer to initiate litigation, so that is a totally nonsensical answer. These bozos think they can get away with stone walling, but people are reading and watching, and when the Executive tries again for office, his adversaries will have a wealth of ammunition available...Another mess created by Mr. Homan, who keeps everything secret, and now it gets dumped at the feet of his boss, the Executive...and what an irony that Mr. Homan should have told KK when he was Council Chair, and now this blows up on his watch.
JDStuts
9:22 pm on Thursday, April 19, 2012
If you read my comment on the original post you'll see I called this.
This is a CALPERS incident all over again. The local authority probably failed with due diligence. Often this failure comes from a personal compromise where one party profited from either a promise or an ancillary consulting gig.
Again, if I was on the council new to this discovery - I'd call the Feds.
A local council person trying to sit down in a 3 hour window to learn municipal financing and the investment side gaming is a farce. Not one person on the council has the experience or knowledge to understand who got played. In fact, this probably why Kamenetz and Homan were such easy marks. Ego is massive on the investment side which is why we can spot it so easily and why public finance players have brought down so many small munic players like town selectmen and county execs.
Want to get out this unscathed? Call the Feds. Balto County officers liability underwriters - get ready for a massive claim hit.
Buzz Beeler
1:36 pm on Friday, April 20, 2012
JD take a look at Article 5 of the charter, 5-1-247. Read it and give me your slant on this. It spells out the fiduciary responsibility of the pension board on these matters.
I see a couple of booboos. I would like to see the ties between the broker and the county. He could have made anywhere from $600,000 to $1 mil on this deal.
Bryan get cracking!
Emma Norton
10:20 am on Friday, April 20, 2012
the COVER-UP and MICROMANAGEMENT within the Kamenetz administration is unprecedented, illegal and worth serious investigation!
FactChecker
10:38 pm on Friday, April 20, 2012
The County seems to be attempting to recover funds through a law suit as a result of the mortgage crisis that drove every part of our economy in a tail spin four years ago.
lemmy winks
8:59 am on Saturday, April 21, 2012
To Fact Checker...I agree 100%. But if that's what the County wanted to do, why did they wait over 5 years to do so!! Now the statute of limitations has expired. The lawyer wrote to the county nearly a year ago seeking to file suit on behalf of the county to recover the loss, and the letter sat for a year with no response!! Please explain these two points in your next post. And while you are at it, explain why the public wasn't told about this loss when it happened, instead of 5 years down the road when details come out about a "secret meeting." I will be checking back for your reply.
Buzz Beeler
1:38 am on Sunday, April 22, 2012
Lemmy me thinks the reason is because there is more to this than meets the eye. Why would the county sit on an attempt to recover $21 million in pension money unless that suit would reveal certain actions the county took in brokering that deal that were outside the guidelines of the charter.
Read the sections related to the pension and it does raise some interesting questions. It's one thing to make a mistake but yet another to compound that mistake.
In either case someone is going to have to answer to these issues of why both routs were taken or not taken.
John Gooder
10:24 pm on Sunday, April 22, 2012
I heard the county exec on tv this morning say that the council WAS briefed five years ago and in response they tightened up the regs. So what's the story here? We got screwed just like every investor across this country. I hope they file a lawsuit against those greedy SOBs and we get something back!