There have been some interesting developments at our pension fund, so I thought I would focus this newsletter on the administration of the pension fund. The most interesting development that I think members should be aware of is that the Board renewed our fiduciary insurance policy in late 2020. The fiduciary insurance covers the trustees if they are sued for violating their fiduciary obligations to the membership; trustees are personally liable for their actions, or inactions, as it relates to their fiduciary duty. What is interesting, and of concern, is that no insurance carrier wanted to insure us due to our poor funding status. Our insurance broker was only able to find one insurance carrier, out of 10, that would cover the trustees of the pension fund. Even more concerning is that the lone insurance company willing to cover the pension fund initially stated it would not cover any litigation for inadequate funding. Members of the pension fund can sue the trustees, for failing to act, as the City continued to underfund our retirement security. Insurance companies are in the business of identifying and measuring risk. If you have been paying attention to the pension crisis in Illinois and its cities, it isn’t difficult to see that the risk of pension underfunding leading to financial harm to firefighters and paramedics, is approaching. Insurance companies do not want to get in front of that eventuality – it’s too risky. Essentially, in my opinion, the insurance carriers believed that there is a real probability members will organize and bring litigation against the trustees for failing to take effective action as our pension fund was continuously underfunded. It is for this reason I previously argued, unsuccessfully, with my fellow trustees, that the pension board should initiate litigation against the City to protect member’s retirement benefits. I’ve brought this issue up twice to the Retirement Board since I have become a trustee. I believe such inaction by the Retirement Board is indicative of failed administration.
Another issue I have been asked about involves the transcripts of a pension board meeting in 2020. The transcripts, which are published on the pension fund’s website, record the Fire Department First Deputy threatening me when I refused to recognize her interpretation of facts. I had to remind her that the First Deputy’s bugles had no standing at the pension fund, the First Deputy then told me “You will find out”. Those were some pretty surprising words to hear in a public meeting. It is obvious the pension board does not appreciate my newsletters and view them as a violation of the Board’s Communication Policy. I strongly disagree with that assessment. I helped write the Communication Policy with the assistance of the Fund’s legal counsel, we spent fund resources to essentially codify the policy in an internal handbook. I specifically included in the policy an opportunity for any trustee to write an article in the Fund’s newsletter, not just the Secretary. When I decided to include a letter in the Fund’s monthly newsletter in May 2019, some trustees didn’t want the newsletter published and instead decided to question the interpretation of the Communication Policy. The decision to review the already adopted policy was tabled and sent to the Legal Committee for review and has never been brought up again. This is not the way to administer a pension fund. You don’t create policies and then not follow them when you want to shut out opposing views or it is politically expedient to do so. The same goes for funding our pensions; legislators shouldn’t write funding mandates for the pension fund and then either ignore them or rewrite them when it becomes politically difficult to abide by the law. It may not gain me friends on the pension board, but I need to point out the obvious – our current Board struggles with the administration of this fund. This brings me to another issue our trustees struggle with – time management.
Some of the trustees have trouble making meetings or remaining at meetings for important votes. If you recall, I mentioned this issue before when, eight months ago, a former labor trustee failed to show up for a vote and a member was almost denied a benefit. Well the Retirement Board still struggles with this issue; at the November 2020 monthly meeting, a member was denied a benefit because some trustees were not in attendance when it was time to vote. All members should be aware, that in order to be granted a benefit under the pension code, a Chicago firefighter or paramedic needs the vote of a majority of the Board, whether a trustee is present or not. If a trustee doesn’t show up for a meeting, then their non-vote is effectively a vote to deny a benefit. The Retirement Board was already short a trustee and when the time came to vote, another trustee had chosen to leave the meeting. So, this member came up short to get a benefit – he had 4 of the 5 affirmative votes needed to be granted the benefit. A majority of the present Retirement Board believed this member should get a benefit, but because some pension trustees are too busy to abide by their fiduciary obligation and attend meetings, this member is denied a benefit. I find this current Board’s actions extremely unprofessional and disrespectful, it places an undue burden on the member applying for a benefit. This Board has a fiduciary obligation to the members and I find the lack of effort by the Board and lack of advocacy for the membership disheartening. I personally do not know the member requesting the benefit in this case, although I did have another member state he ‘wasn’t a good guy’. I don’t really care about statements like that. Not being a ‘good guy’ is not grounds to deny a benefit; a member has the right to request a benefit and have their case heard by the trustees. I attempt to leave the firehouse politics out of any case presented and vote strictly on the merits of the case. It is very disappointing, in my opinion, that the current Retirement Board is unable to effectively administer our fund for the benefit of our members.
And finally, I have been asked about the defamation lawsuit Captain Tony Martin has filed against me. It is true Tony Martin has filed a lawsuit against me, demanding $25,000, for allegedly posting inaccurate information about his involvement in the felony theft discovered at the pension fund. I stand by what I have written and what I have stated about this issue. After reading the lawsuit, I think Tony will have trouble finding any firefighter that can clearly offer testimony which supports his version of the facts stated in his lawsuit. Lawsuits are draining and time consuming. I don’t enjoy bringing up theft, poor administration and irresponsible public policy pushed by elected officials. It is my belief, Tony Martin has been a trustee much too long and was an impediment to addressing the issues affecting our pension fund, particularly its administration and funding. I don’t think it would have come to this if Tony could have accepted he has stayed in the position too long and that his service was longer necessary at the pension fund. Having to drag former trustees and fund employees through depositions, to recall conversations they had at board meetings or what they know about the felony theft, is not something I relish. But I think it is best to let the attorneys figure this out, it is definitely an unfortunate expense I will need to incur, but that is the price you have to pay when battling entrenched political forces that continue to place political ambition over our retirement security. At the January Board meeting, the fund attorney did update the trustees that the fiduciary insurance carrier would defend me in this lawsuit; however, I will still have to incur some costs. After the insurance carrier agreed to cover the claim, Tony Martin, through his attorney, is now demanding $750,000 instead of the original $25,000 demanded before the insurance company was involved. On principal, I am hesitant to ask the pension fund to indirectly bare the cost of a settlement for Tony Martin’s benefit. These lawsuits aren’t new, some members might recall a former Fire Commissioner suing another former Fire Commissioner for wrongful termination after alleged sexual misconduct surfaced, or more recently the Police Superintendent’s driver suing the former Superintendent for abuse over a three year period. It is unfortunate to see all these superfluous lawsuits.
I have always appreciated the memberships support and take the trust you put in me seriously. I came into this role as a trustee with a professional background in accounting and finance with experience designing internal controls to prevent fraud. I didn’t go looking for trouble, most of it fell right in my lap just from asking legitimate questions of staff, reviewing reports, reading meeting minutes and just paying attention. My time serving as the pension fund’s executive director opened my eyes to a lot of poor management and administrative decisions, and questionable transactions. I feel it is my duty to forcefully speak out on these matters, I believe that is what the membership wants and expects. It appears some of my fellow trustees have a more cavalier attitude on these issues, which is probably the reason I have seen two of our pension fund trustees sent to prison since I came on the fire department. There is a big difference between being an administrator and being a politician!
My long term concern is that the City will try to capitalize on the pension board’s inability to administer our fund as an excuse to consolidate our fund into one, or all, of the other City pension funds. This would be consistent with the recent actions by the State which recently consolidated the investment functions of all the downstate fire pension funds. Consolidating the pension funds would deny us an opportunity to have someone representing our interests, voicing our shared concerns and having independent eyes on the fund’s administration. I suspect the City would rather not deal with any firefighters asking questions. I’m also concerned the City’s longer term strategy may be to prepare for bankruptcy. The outcome of bankruptcy would be much easier for the City to control if they had the pension funds consolidated. The Chapter 9 Bankruptcy code allows for the establishment of a ‘retiree group’ to represent the interest of pensioners. You may think that it would make sense for Local 2 to be the representative of firefighters and paramedics. But I could see the City successfully making the argument, to a federal judge, that the consolidated pension board should represent the pensioners. Under that scenario, I think the rank and file membership would lose access to a strong advocate representing their interests. I am not implying this is definitively the City’s strategy, but it is certainly something we should be aware of moving forward. It is for these reasons I think it is important that we remain vigilant on how the pension fund is administered and demand advocacy for the membership, and, it is why I bring these important issues to your attention. Be safe and Happy St. Patrick’s Day to you all!
Timothy McPhillips
Pension Fund Trustee
This newsletter is my opinion only and clearly is not the opinion of the Retirement Board of the Firemen’s Annuity and Benefit Fund.
