Detroit, MI - Jan. 28, 2020 /PRNewswire/ -- The Police and Fire Retirement System of the City of Detroit Board of Trustees has filed a lawsuit in Federal Bankruptcy Court requesting an injunction against a 75% pay raise the PFRS Investment Committee is trying to give the retirement system's former Deputy Chief Investment Officer.
The lawsuit alleges that the Investment Committee, established as part of the exit from city bankruptcy, has overstepped its authority, breached its fiduciary duty and thwarted PFRS Board and city personnel payment policies by entering into a purported independent contractor agreement with a former employee.
On direction of the PFRS Board, a complaint for injunctive and declaratory relief was filed with the United States Bankruptcy Court, Eastern District of Michigan Southern Division and assigned Case No. 13-53846 with Honorable Judge Thomas J. Tucker.
"This adversary proceeding is brought to remedy the breaches of fiduciary duty committed by the PFRS Investment Committee and its individual members and Chief Investment Officer, to obtain injunctive relief and declare the parties' rights and responsibilities…pursuant to the terms of the Eighth Amended Plan of Adjustment of Debts of the City of Detroit," the opening paragraph reads.
The complaint was filed with the court by on behalf of the Board by outside special counsel Couzens Lansky.
The conflict between the PFRS and its Investment Committee – originally appointed as part of the City's bankruptcy and Chaired by Robert Smith -- arose from pay raises the Investment Committee granted to its Chief Investment Officer and Deputy CIO raising their respective pay levels to $315,000 and $285,000 annually.
Chief Investment Officer Ryan Bigelow's compensation increased twice since last winter. The investment committee first adopted a proposal in December 2018 that took his annual $242,000 pay to $264,000. And in March 2019, it voted it up again to $315,000.
The Investment Committee also approved a 75% pay raise for the Deputy Chief Investment Officer Kevin Kenneally from $162,781 to $224,000 annually. When the PFRS Board objected, the Investment Committee arranged a deal for Kenneally to resign as an employee and be hired as an "Independent Contractor" with fewer duties, higher pay and a $60,000 signing bonus. Further, the Investment Committee intimated it would seek to delay or prevent payments from the "Grand Bargain" totaling some $18.3 million unless the PFRS Board agreed to fund the pay raises.
Kenneally resigned from the Pension Board staff position on December 27, 2019 and assumed a role as an Independent Contractor on January 6, 2020. The PFRS Board has refused to pay invoices submitted by Kenneally. The PFRS Board authorized the hiring of special counsel to assist in crafting the complaint to request the Federal Bankruptcy Court, which approved the "Plan of Adjustment" to rule on the validity of the contract and the ability of the Board to set employee wages.
The PFRS Board is currently comprised of a 16-member Board of Trustees. The Board includes six elected active duty police and fire personnel (3 each); and two elected retired personnel (one each police and fire); one City Council designee appointed and seven ex-officio appointees of the City of Detroit. The Board oversees the $2.8 billion fund serving some 8,000 retired police and fire and approximately 3,000 active duty first responders.
Twice a month public meetings of the PFRS are held on Thursdays at 9 a.m. Minutes and meeting records are posted on the PFRS website at www.PFRSDetroit.org.
The Police and Fire Retirement System of the City of Detroit was founded under City Charter and is the fiduciary for the pensions of all police and fire personnel. The PFRS is a separate entity from the city's General Retirement System. For more information please visit www.PFRSDetroit.org.