Public Employees Ex-President in Cincinnati Sentenced for $750K+ Embezzlement | National Legal and Policy Center

Submitted by Carl Horowitz on Thu, 07/12/2012 – 18:19

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Diana Frey wasn’t surprised at the sentence she received for embezzling from the public-sector union she had set up years before. Those thefts, after all, nearly put the union out of existence. On June 7, Frey, former president of Cincinnati Organized and Dedicated Employees (CODE), was sentenced in U.S. District Court for the Southern District of Ohio to 51 months in prison and three years of supervised release, and was ordered to pay $758,056 in restitution plus a $100 assessment. Last September she pled guilty to one count of wire fraud. For more than six years Frey, an ex-employee with the Cincinnati Metropolitan Sewer District, obtained union funds through a variety of illegal means. Whether the union gets its money back depends on whether the federal government can seize properties she bought with the stolen funds.

Union Corruption Update provided extensive coverage of this story last year. CODE is an 800-member independent union consisting of Cincinnati-area public-sector middle managers, professionals, technicians and nurses. Diana Frey founded the union in the middle part of the last decade and ran it until last summer. Unfortunately, she also nearly ran it into the ground. Last July 20, federal prosecutors charged that Frey, now 52 and a Cincinnati resident, during 2005-11 transferred $757,009 in member dues (a figure since slightly upped to $758,056) for use by her and family members. She obtained the funds by writing unauthorized union checks, and making unauthorized union wire transfers, ATM withdrawals and credit card purchases. An anonymous tip to the U.S. Department of Labor led to a departmental investigation and an indictment by a grand jury. Frey initially pleaded not guilty at her arraignment on July 28, but the evidence of guilt became so compelling that she changed her plea to guilty on September 21.

Federal sentencing guidelines had recommended Frey serve between 33 and 41 months in prison. But U.S. District Judge Susan Dlott exercised her discretion to extend that period to 51 months, citing the defendant’s “blatant pattern” of deceit and theft. “In white-collar crime, a person can do with a pen what a drug dealer is doing with his gun,” said Dlott. “It’s not really any different.” Most of the stolen money went into Frey’s purchase, sale or improvements of six residential properties during 2007-09 on behalf of family members. Toward that end, the judge issued a preliminary forfeiture order under which the government could seize her interest in three homes plus several cars. Without such recourse, CODE might not cover mounting bills. Frey, for her part, is remorseful. At sentencing, she apologized to her family, CODE members and the city “for the shame and embarrassment I’ve caused all of them.” The union might be relieved at her display of contrition, but it still wants its money back.

Related:

Former Public Employees Boss in Cincinnati Pleads Guilty

Cincinnati Public Employees Ex-Boss Set to Plead Guilty

Cincinnati Public Employees President Charged with $750K+ Theft

via Public Employees Ex-President in Cincinnati Sentenced for $750K+ Embezzlement | National Legal and Policy Center.

California City Facing Bankruptcy Depleted Reserve Funds – Businessweek

San Bernardino’s slide toward bankruptcy came after new officials discovered that the California city had all but depleted special funds that had propped up its budget, the city attorney said.

The City Council voted July 10 to seek bankruptcy protection just a day after the interim city manager and new budget director warned them of a projected $45 million deficit, according to City Attorney James Penman and city budget documents. That sum represents 38 percent of its annual operational spending.

Special funds associated with particular purposes, such as redevelopment, retiree health and worker’s compensation, had been tapped by previous officials to balance the general fund and had run dry, according to budget documents.

“I suspected that there was something coming,” Penman said in an interview. “We knew there was something wrong.”

San Bernardino, a community of 209,000 east of Los Angeles, became the third California municipality to opt for court protection from creditors in a month, following Stockton and Mammoth Lakes, the first such filings since 2008. Cities and towns across the U.S. have been strained by soaring costs for labor including pensions and retiree health benefits, while tax revenue plunged after the longest recession since the 1930s.

Penman said he noticed irregularities in city accounting in February and notified an “outside governmental agency” on Feb. 29. He declined to name the agency, or say whether it was law enforcement, or detail evidence of the irregularity.

“All evidence of suspected wrongdoing has been turned over to the appropriate governmental agencies,” he said.

Penman, first elected in 1987 as chief lawyer for the city, said the magnitude of San Bernardino’s financial problems came to light only in June.

$127,000 Cash

Andrea Travis-Miller, the interim city manager, and Jason Simpson, the new director of finance, discovered that the city’s cash reserves had fallen as low as $127,000, jeopardizing the June 15 employee payroll of more than $4 million, Penman said.

Travis-Miller and Simpson were in a meeting and unavailable to comment on Penman’s account, their assistants said.

In a draft of a budget document dated June 26 and released by the city clerk’s office, Travis-Miller and Simpson wrote that San Bernardino was facing insolvency as both its general fund and special funds were out of money.

More than half of the projected $45 million deficit resulted from the city shortchanging special funds such as retiree health, workers’ compensation and general liability, the budget document said.

The dissolution of the city’s Economic Development Agency, one of about 400 such agencies in California eliminated by a state law Feb. 1, compounded the crisis by taking away one funding source, the memo said.

‘Sustained Reductions’

“The remaining fund balances cannot pay for ongoing operating costs and large sustained reductions will be required,” Travis-Miller and Simpson wrote in the memo, which was completed and released to the City Council July 9.

“The EDA shutdown was the straw that broke the camel’s back, but it was only a straw,” Penman said.

Because the city is unlikely to weather the next 60 days with enough money to pay its employees, it is poised to become the first California city to bypass mediation with creditors under a new state law by declaring a fiscal emergency, Penman said.

The City Council has scheduled a vote July 16 on the emergency declaration that would allow it to skip a 60-day neutral evaluation process in which creditors have a right to participate, he said.

Stockton, a community of 292,000 east of San Francisco, and Mammoth Lakes, a mountain resort of 8,200, both entered into mediation with creditors such as labor unions and bondholders before filing for bankruptcy in the past three weeks.

A law signed by Governor Jerry Brown that took effect this year requires municipalities to pursue mediation or declare a fiscal emergency before seeking bankruptcy protection. Public- employee unions pressed for the law after Vallejo, a city of 120,000 in the San Francisco Bay area, went bankrupt in 2008 and asked the court to let it void labor contracts.

via California City Facing Bankruptcy Depleted Reserve Funds – Businessweek.

San Bernardino Workers Fear the Worst after City Proposes Bankruptcy | NBC Southern California

San Bernadino librarians are worried they could lose their jobs if the city declares bankruptcy

By James Wulff |  Thursday, Jul 12, 2012  |  Updated 4:49 PM PDTView Comments (0) | Email | Print

James Wulff, KNBC

San Bernardino librarians fear cuts in wake of city-proposed bankruptcy. They talk on Wednesday, July 11, 2012 about their concerns.

City workers in San Bernardino are worried about their future after the city proposed bankruptcy earlier this week.

Librarians at the San Bernardino public library recently spoke to NBC4 about how this move could affect them.

After city leaders met Tuesday night to discuss the city’s future and financial problems,library Ciculation Manager Debra Bemben said she was filled with anxiety.

“We’ve been all knotted up inside for months and its not any better after last night, except there is news. But, we don’t know what’s going to happen,” Bemben said.

Library Assistant Andrea Zuniga says city job cuts would hurt her family because her husband also works for the city.

“That’s two incomes that will be affected by whatever happens,”  Zuniga said.

The librarians say this is a particularly frustrating time because circulation has increased the last several months because of expanded programs. So it’s been getting busier at the library, which sees patrons from cities outside San Bernardino’s boundaries.

“It’s an essential service in this community. There are a number of people, not just here, but all over, who come to this library, ” Literacy Coordinator Paula Miller said.

via San Bernardino Workers Fear the Worst after City Proposes Bankruptcy | NBC Southern California.

Will cities fall into bankruptcy like dominoes? | mammoth, disgraced, municipally – The Orange County Register

By TONY SAAVEDRA / THE ORANGE COUNTY REGISTER

So San Bernardino has joined Stockton and Mammoth Lakes in the ranks of the municipally disgraced….

Hey. We’re Orange County. We know how you feel – but we didn’t let a little $1.64 billion bankruptcy slow us down. Much.

Are the municipal dominoes falling? Will more cities file for bankruptcy because they can’t pay their bills? And will any of them be here in Orange County?

We at The Watchdog are busy crunching scads of numbers to give you a more authoritative answer to this question, but we can tell you right now that a couple of cities here have come quite close to the brink but have managed, thus far, to avoid bankruptcy court.

About one year ago, Santa Ana looked like it was going down. The city faced a projected $13.6 million deficit, with another shortfall of $30 million predicted for this year. The city dissolved its fire department – outsourcing to the Orange County Fire Authority – at a savings of $8.7 million. Employee unions agreed to another $10.7 million in concessions and Santa Ana reduced its workforce by 582 positions over the last five years. The effort led to a current $196.5 million budget that is balanced for the first time in years.

Stanton, which has a workforce of fewer than 50 people, is trying to iron out its financial woes, after spending 74 percent of its general fund on police and fire protection last year. (The city of Vallejo was at 80 percent when it went bankrupt from the strain of pay and pensions in 2008.) Facing a $1.8 million shortfall this fiscal year, Stanton is trying to chop $1.3 million from its $8 million contract with the Orange County Sheriff’s Department. The closest the sheriff’s department has been able to come is $637,653 – prompting the Stanton council to issue an ultimatum: Cut more or we’ll take our business elsewhere.

Costa Mesa earned national attention for its budget plight when it pink-slipped more than half its employees in 2011, apparently prompting one employee to leap to his death from atop City Hall. The workers’ union has obtained a court order banning Costa Mesa from outsourcing to private firms. And so far the city has outsourced its jail services and street sweeping and has rescinded layoff notices for three other services. The city is starting to rebound after grounding its helicopters and cutting staff. It approved a $132.7 million budget, in the red by $1 million.

Filing for bankruptcy is mostly a function of current bills due exceeding current revenues available — and an inability to borrow to paper over the mess. More soon.

via Will cities fall into bankruptcy like dominoes? | mammoth, disgraced, municipally – The Orange County Register.

Pension Reform: Public Keeps the Pressure On | NBC Southern California

California voters may have contradictory feelings on issues like taxing and spending, but they are clear when it comes to pension reform–do it, and do it now.

A Field poll released on July 10 has voters favoring a pension cap by the one-sided margin of 67 percent to 25 percent. And by a margin of nearly two-to-one (60 percent to 32 percent), the voters want the age hiked before recipients are eligible to collect their pensions.

If California Democratic Governor Jerry Brown didn’t sense the urgency for pension reform before (and he probably did), he certainly does now.

Brown is a veteran of public anger. He witnessed as much in 1978 when 63 percent of voters passed Proposition 13, the state’s seminal property tax reduction initiative. He also knows that voters haven’t passed any statewide tax increase in nearly a decade.

Voter anger on pensions and resistance to taxes could be formidable obstacles to Brown’s temporary taxes increase this November unless he finds a way to convince the public that he is the steward of careful spending.

That’s why Brown can ill-afford for the legislature to recess without the passage of pension reform. Such legislation is the key to Brown’s credibility and the foundation (albeit shaky) of voter support for his ballot proposition.

Brown already has shown tight-fisted spending. He recalled state cellphones and cars, drastically reduced welfare benefits and negotiated reductions in state workers’ salaries. Cumulatively, these successes have painted a picture of a man who makes Scrooge seem like a spendthrift.

Now he must further solidify his new reputation by getting the legislature to pass pension reform. He knows it.

The question is whether the Democratic legislators are willing to go up against their long-time organized labor supporters. If they don’t, there may be a pension reform initiative in 2014 that makes current negotiations seem like child’s play.

Larry Gerston teaches political science at San Jose State University and is the political analyst for NBC Bay Area.

via Pension Reform: Public Keeps the Pressure On | NBC Southern California.

Judge delays pension reform

While Prop. B’s supporters were celebrating victory on June 5, a few folks I chatted with that evening talked about how tricky the measure would be to implement.

“It’s a very ugly baby,” one City Hall staffer told me.

This was underscored at a hearing on Tuesday, July 10, where attorneys for the state’s Public Employment Relations Board (PERB) and the city’s Municipal Employees Association (MEA), asked a judge to halt the measure’s implementation. In a ruling issued July 11, Judge Luis Vargas ordered the city to delay Prop. B’s roll-out until at least July 27.

Here’s where it gets tricky: City Attorney Jan Goldsmith says Prop. B requires the city to close its pension system to new hires as soon as California Secretary of State Debra Bowen certifies the election. That’s supposed to happen within the next few weeks. By law, the city and its labor unions need to meet to negotiate a new retirement plan for anyone hired after Prop. B takes effect. Not only is that expected to be a lengthy process; it’s yet to begin.

“We have no proposals, no meeting date, and the City Council will be taking a legislative recess for the month of August,” MEA attorney Ann Smith told the judge Tuesday.

Meanwhile, Prop. B’s proponents have made much about a quick implementation. Immediately following the election, Goldsmith said there’d need to be a hiring freeze until the details of the new retirement plan were worked out. At the July 10 hearing, he seemed to back away from that position, though he argued that voters were “very clear” that no new employees could be enrolled in the city’s pension plan. Without a new retirement plan, and without the ability to enroll employees in the old plan, “we’re between a rock and a hard spot,” Goldsmith said. He told Smith at the hearing that he’d be happy to start the negotiation process the next morning at 9 a.m. Problem is, he can’t.

“He’s not the negotiator for the city,” Smith told Vargas “the mayor is.”

Vargas’ ruling asks the parties to return to court on July 27 for a review hearing and encourages them to work something out before then.

“Both parties represent [that] the imposition of the [temporary restraining order] will not halt meet and confer efforts,” he wrote. The restraining order also allows time for a state-appointed administrative law judge to hear arguments in a challenge to Prop. B’s legality. That hearing starts July 17 and is expected to last six days.

Three of the measure’s proponents—T.J. Zane, April Boling and Steve Williams, the president, treasurer and chairman of the Lincoln Club, which spent $415,000 supporting Prop. B—asked the state Supreme Court to stop that hearing. On July 10, the court denied that request.

via Judge delays pension reform.

29 USC CHAPTER 18 – EMPLOYEE RETIREMENT INCOME SECURITY PROGRAM

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There are 2 Updates Pending. Select the tab below to view.

This preliminary release may be subject to further revision before it is released again as a final version. As with other online versions of the Code, the U.S. Code Classification Tables should be consulted for the latest laws affecting the Code. Those using the USCPrelim should verify the text against the printed slip laws available from GPO(Government Printing Office), the laws as shown on THOMAS (a legislative service of the Library of Congress), and the final version of the Code when it becomes available.

Current through Pub. L. 112-123. (See Public Laws for the current Congress.)

Council says no to high-priced safety feature | Superior Telegram | Superior, Wisconsin

A proposal to purchase new radios for the Superior Fire Department is on hold while the council ponders the value of a feature designed for safety.

The feature, which Fire Chief Jim Rigstad said would enhance firefighters’ safety, would require the council to accept a higher bid and leave the low bid — submitted by Duluth-Superior Communications — laying on the table.

Last week, the council split 5-5 on a motion to approve the purchase of the radios.

Called a “heartbeat out of range alert,” the feature was required by the request for proposals, and was not a feature included on the radios offered by Duluth-Superior Communications, according to Rigstad.

When the bids came in, the radios offered by Duluth-Superior Communications were deficient, said Councilor Jackie Stenberg, who joined councilors Tom Bridge, Denise McDonald, Bob Finsland and Mike Herrick to favor of the purchase.

Because the 35 radios being considered came with a $26,000 higher price tag than the lowest bid, and would be purchased from a company outside the area, Councilors Dan Olson, Warren Bender, Len Joyal, Mick MacKenzie and Bob Browne voted against the motion, which failed for a lack of majority.

Olson, a proponent of buying local, said he talked to firefighters, and he doesn’t believe the safety feature is essential. After all, the alarm could become an irritant that would just prompt firefighters to turn it off, he said.

Mayor Bruce Hagen voted no on the matter and sent it back to committee for further review.

The committee slated to review the purchase canceled its July meeting before last week’s council meeting. The panel’s next regularly scheduled meeting is Aug. 8.

via Council says no to high-priced safety feature | Superior Telegram | Superior, Wisconsin.

TEXT-Fitch:San San Bernardino, Calif. bankruptcy has no effect on cty’s investment pool | Reuters

July 12 – The ‘AAA/V1′ fund credit and volatility ratings assigned to the San Bernardino County Investment Pool (CA) remain unaffected by the City of San Bernardino bankruptcy filing on July 11, 2012. The San Bernardino County Investment Pool is managed by the San Bernardino County Treasurer’s Office on behalf of the county, local school districts and other special districts. The city has not been participating in the pool. As of May 31, 2011, the pool had approximately $4.1 billion in assets under management. POOL STRUCTURE AND LIQUIDITY The pool is comprised almost entirely of monies held by the San Bernardino County Treasurer on behalf of school districts, community college districts, and certain special districts within the county. Because the city was not a pool’s depositor, there will be no unexpected cash outflows related to the city bankruptcy filing. The captive nature of the investor base allows the pool to invest in longer-dated maturity-matching eligible securities and immunizes large scheduled cash outflows such as payroll. Nonetheless, the pool manages liquidity risk conservatively and maintains $300 million in securities maturing overnight, with at least $100 million in securities maturing within seven days. As of May 31, 2012, the pool had 18% of its portfolio in overnight securities. INVESTMENT OBJECTIVES The San Bernardino County Investment Pool’s primary investment objective is to safeguard investment principal. The secondary objective is to maintain sufficient liquidity to ensure that funds are available to meet daily cash flow requirements. The third consideration is to achieve a reasonable rate of return or yields consistent with the first two objectives. INVESTMENT POLICIES The pool invests in U.S. Treasury and government agency securities, U.S. money market funds and other money market instruments including commercial paper, certificates of deposit, bankers’ acceptances and corporate medium-term notes. Per its statement of investment policy, the pool must be invested in securities rated at least ‘F1’ or ‘AA’ by Fitch or equivalent. As of May 31, 2012, approximately 58% of the pool’s portfolio was invested in securities issued or guaranteed by the U.S. government, 25% was in bank certificates of deposit, 12% was in short-term obligations of financial and non-financial corporations, 3% was allocated to domestic money market funds, and 2% in repurchase agreements. As of the same date, the weighted average credit quality of the fund, as measured by Fitch’s weighted average rating factor (WARF), was 0.142, which is in line with Fitch’s ‘AAA’ fund credit rating criteria guidelines. For additional information about Fitch bond fund rating guidelines, please review the criteria referenced below, which can be found on Fitch’s website.

via TEXT-Fitch:San San Bernardino, Calif. bankruptcy has no effect on cty’s investment pool | Reuters.

Arbitrator: County should have negotiated health insurance – Quincy Herald-Whig | Illinois & Missouri News, Sports

Posted: Jul 12, 2012 9:55 AM CDT

Updated: Jul 12, 2012 10:25 AM CDT

By MATT HOPF Herald-Whig Staff Writer

An arbitrator who reviewed a grievance filed against Adams County said the county should have negotiated with the Machinists Union when it increased health insurance premiums for dependents by 73 percent in August.

The decision, issued June 27, was announced Tuesday at the Adams County Board meeting. A copy of the decision obtained by The Herald-Whig Wednesday showed that arbitrator James P. O’Grady of St. Louis ordered the two sides to meet and discuss a resolution to the dependent health insurance rate, and O’Grady wrote that he “retains jurisdiction to aid in the administration” of a settlement.

At the arbitration, business representative Ross Miller spoke on behalf of Machinists Local 822. County Board members John Johnson and John Heidbreder, along with Assistant State’s Attorney Curtis Lovelace, represented the county.

According to the union contract, all “significant or substantial” changes in the health insurance coverage must be bargained. At a July 25, 2011, meeting between county and union representatives to discuss changes to the health insurance plan, the Machinists said premiums were not discussed. The County Board announced at its Aug. 9, 2011, meeting that dependent insurance premiums were going to increase from $440 to $762 a month.

The grievance was filed Aug. 3, 2011.

The two sides met with the arbitrator March 22 in Quincy. The union suggested in arbitration that the rates be increased by 20 percent, which was the increase for individual employee insurance last year. The county currently pays $597 a month per employee for health insurance. The union also noted that 45 county employees were using the dependent health care insurance on Aug. 31, 2011, and as of the date of the arbitration hearing, only 15 had kept that insurance for their dependents.

The county argued that there was no need to bargain the dependent coverage cost because of the language in the agreement. The county said dependent insurance rates should have been increased to $539 three years earlier but were mistakenly not.

The contract states that the county should provide health insurance to employees at no cost and offer dependent insurance covered by the employee.

Employees represented by the Fraternal Order of Police also filed a grievance against the county over the increase in premiums, but the decision of the arbitrator in that case has not yet been released.

— mhopf@whig.com/221-3391

via Arbitrator: County should have negotiated health insurance – Quincy Herald-Whig | Illinois & Missouri News, Sports.