Lawsuit Contends Consultant Misled Detroit Pension Plan
Today’s post was shared by The Workers’ Injury Law & Advocacy Group and comes from dealbook.nytimes.com
Updated, 8:06 p.m. | With the nation’s states and cities slowly sinking in a $3 trillion pension hole, the professionals who advise their pension plans have long wondered whether the fingers of blame might eventually point to them.
One of those fingers has surfaced in bankrupt Detroit, and it is singling out Gabriel Roeder Smith & Company, a top actuarial consultant for public pensions, which has hundreds of clients across the country that rely on it to keep track of data, calculate required annual contributions and advise on key assumptions like future investment returns.
Detroit has been a client of Gabriel Roeder since 1938, when the city first started offering pensions. Now the city is bankrupt, the pension fund is short, benefits are being cut and one of the system’s roughly 35,000 members, Coletta Estes, is suing the firm, contending it used faulty methods and assumptions that “doomed the plan to financial ruin.”
Gabriel Roeder’s job was to help Detroit’s pension trustees run a sound plan, she says, but instead the firm covered up a growing shortfall and encouraged the trustees to spend money they did not really have. Her complaint contends that the actuaries did this knowingly, “in concert with the plan trustees to further their self-interest.” The lawsuit seeks to…