Former New Canaan CFO: "I was presumptuous."
Published 2:05 pm, Wednesday, October 17, 2012
Former Chief Financial Officer Gary Conrad did not have the authority to make unilateral changes to pension benefits, and it is unclear whether such action constitutes criminal behavior, according to the official review presented to the Board of Selectmen Tuesday morning by Garrett Denniston of the law firm Bishop, Jackson & Kelly, LLC,
Reached by email, Conrad admitted that he did not follow procedure, and assumed that the changes he made would pass through the necessary town bodies eventually.
"The calculation of Mr. Walker's pension was done based on the assumption that the vesting change for elected officials would be enacted," he stated in the email. "There were open discussions over the years on this amendment. I assumed the amendment would pass and it was presumptuous to assume that. The [pension] plan amendment should have been submitted to the boards prior to Mr. Walker stepping down from office, but due to the change in actuaries that was not possible due to the plan filing for a determination being delayed. Making that decision to calculate the pension based on the passage of the amendment was not done with any intent to break any rules of code of conduct."
First Selectman Rob Mallozzi requested the review following an uproar over an amendment to the town's pension plan that retroactively lowered the number of years needed from five to four for an elected official to be fully vested. The amendment allowed former First Selectman Jeb Walker to continue to receive the fully vested rate that Conrad had approved when Walker left office in December. That rate was $944 in pension benefits per month as a fully vested retiree, as opposed to the $373 per month to which Walker was technically entitled as a partially vested retiree. That amendment was approved unanimously by the Board of Finance and passed in a close vote by the Town Council in August.
The report determined that Conrad was responsible for amending the pension plan unilaterally.
"The proposed plan had not been approved by the Board of Finance or the Town Council at the time the former CFO approved the former first selectman's fully vested pension benefits," the report stated.
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On whether Conrad had the authority to unilaterally amend the pension plan, Denniston said at the Board of Selectmen meeting that the answer was, "pretty easy, and that's `No.'"
The report stated that it is unclear whether Conrad's executive decision constituted criminal activity.
"If the former CFO or the former first selectman was to take the extra benefits with the knowledge that the first selectman had no rights to the benefits, it is possible that the conduct constitutes a criminal violation such as larceny or theft. On the other hand, if actions were done by mistake as to fact or law, with no intent to deprive the pension fund of money, it is equally possible there is no criminal wrongdoing."
The report advised that the Pension Committee decide whether or not to recommend contacting law enforcement on the matter. At the Board of Selectmen meeting, Selectmen Beth Jones and Nick Williams asked whether the town government has the obligation to engage with law enforcement agencies over the issue. Denniston said the town is under no obligation to do so, and that local, state or even federal law enforcement agencies could decide to investigate the matter if they so pleased.
The report went on to say that both Walker and Conrad acted in violation of the town's code of ethics.
"While it is unclear whether the former CFO and former first selectman knew their actions were incorrect, it appears that both were in a position to know that their actions in approving the benefits were improper," the report stated. "In approving the benefits, they used the power of their official positions, intentionally or not, to provide an improper benefit to the former first selectman at the expense of the plan. For that reason, there is reason to believe that both individuals are in violation of the code."
Both in the report and at the meeting, Denniston noted that since both men are no longer employed by the town, the sanctions for violation of the code of ethics -- suspension or termination -- constitute a moot point.
The report also detailed how the town could recoup the money, but it noted, and Mallozzi announced, that Walker has repaid the full amount he was overpaid, which is $4,301. Previously, that number was reported as $5,140, but due to reductions for Walker's contributions to the fund and interest, the final amount was $4,301.
Following the presentation of the report, Mallozzi issued his own statement explaining what changes have been made to ensure that such a situation does not recur.
"We need to leave this chapter feeling confident that the policies, procedures and responsible personnel are in place to prevent this from happening in the future," the statement said. "As CEO of the town, I feel we have or will soon have in place those safeguards. Candidly, I believe all of us are disappointed that they were not put in place or followed to the degree they should have been over the past many years, but we must look forward."
The first among the stated changes was that the town has a new CFO, Dawn Norton.
"A new CFO was hired in May. I can't emphasize enough the implications and importance of this single action," the report said.
The next point stated that the Pension Committee's role has been expanded.
"Under my direction, the Pension Committee meets on a monthly basis -- in the four years prior, they met less than 10 times," the statement said. It went on to say "Agendas and minutes are noticed and posted -- not a consistent process in the past."
As of 4 p.m. Tuesday, the calendar on the town's website showed one meeting in 2012, conducted on Sept. 19. There are no minutes online for any meetings and there is only one agenda posted online, from the Sept. 19 meeting. Item 2 of that meeting was to approve the minutes of the July 31 meeting, and Item 9 was to establish monthly meetings through the end of 2012.
In an interview, Mallozzi said the lack of any meetings listed on the town's website was an oversight, and the dearth of agendas or minutes, which was news to him, would be corrected shortly.
"I don't do any of the posting," he said.
Upon inspection Wednesday morning, the agenda for the Oct. 9 meeting was posted along with rudimentary minutes that noted "unanimous" written by hand next to each agenda item. Mallozzi said the documents were filed properly, but hadn't yet been put online.
Mallozzi said in addition to the Oct. 9 meeting and the Sept. 19 meeting, there was a July 31 meeting, adding that there would be monthly meetings going forward conditional upon finding space, most likely in the fire house.
"We're moving buildings and we're setting them up for next year," he said, adding that the members of the committee had committed to the monthly meetings.
Mallozzi's report went on to say that the Pension Committee will expand what it looks at, now approving all benefits, rather than only disability benefits, as had been the case previously. The statement notes that had this policy been in place before, it "would have certainly prevented the overpayments we have just reviewed."
"The allegation was that the CFO granted and changed the evaluation to a different vesting period than was on the books," Mallozzi said in an interview. "That happened in a room supposedly. What happens if that went before a board? We had a public hearing about five trees on Main Street, and yet no one had a second set of eyes on the pension payment to a first selectman, my God. I guarantee the public, the taxpayers, that we've got five or six eyes looking at this. It's not just done by the strike of a pen by a CFO."
Mallozzi's statement also noted that language will be added specifying how repayments will be managed should occur in the future, that he instructed Human Resources to draft a whistle-blower policy, and to conduct exit interviews with retiring officials the October before they leave office.
Mallozzi is a member of the Pension Committee, along with Board of Finance member Mary Cody and a representative from the fire union and police union.
During the Board of Selectmen meeting Tuesday morning, Mallozzi said it was good that the mistake was noticed when it was, after only $4,300 was issued.
"Thank God we caught it when we came into office," he said.
As the chairman ex-officio of the Board of Finance, Mallozzi was the one responsible for putting the pension plan amendment to lower the vesting period from five years to four years on the board's agenda in the first place.
In an interview, Mallozzi explained that by putting the amendment in question on the agenda, he was actually bringing the issue to light and allowing the Board of Finance to make a decision on it.
"It would have been a past practice in this town that the first selectman probably would have called up the former first selectman to bring in a check. I brought it public. I gave it to the Board of Finance to decide publicly. I'm proud of the way I handled it. It got known. I didn't call anyone and try to work a back-room deal. I believe I handled it in a most trustworthy way by bringing it to the Board of Finance and letting them decide. There are things that went on in this town that the Board of Finance never knew about, and that could have been one of them. It's a complete 360 on how business was conducted in this town," he said.
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