The Essex Regional Retirement Board spent more than $200,000 on lawyers in its failed attempt to land both a government pension and full Social Security benefits for dozens of retiring workers.
Four law firms billed the board for a total of 933 hours of work on litigation that stretched for seven years, in courthouses in Massachusetts, New Hampshire and even Hawaii, according to legal bills obtained by The Salem News.
The board sued the state retirement board after it rejected their ploy to get extra Social Security benefits by transferring 39 public employees to the Manchester Housing Authority for a single day.
Meanwhile, the board poured tens of thousands of taxpayer dollars into both devising the plan and aggressively defending it in court. The legal bills — some of which the board is still paying — totaled $213,913.
"I'm astonished," said Ipswich Town Manager Robert Markel, whose town helps fund the retirement system. "The town of Ipswich has a legal account of under $100,000, and we manage to cover the legal costs of 23 municipal departments with that money."
The Salem News first reported the scheme in February and immediately filed a public records request for copies of the board's legal bills, which finally arrived after a two-month delay.
Not included in the file, however, was a $37,910 invoice for a fourth law firm, Mary F. Healey Attorney at Law, for work dating back as far as June 2007. That bill wasn't submitted until three years later, on Feb. 22, and finally paid by the board this week.
The surprise bill illustrates that even after the termination of former Executive Director Timothy Bassett, unsettling revelations continue to emerge.
"The question of whether we've received all the legal bills is something we face every day," new board Chairman Andrew Maylor told state retirement officials earlier this week.
"... I find myself walking around, repeatedly shaking my head. ... The practices are beyond comprehension."
Pattern of big legal bills
The Somerville-based firm of Moschella & Winston billed the board for 468 hours of work from December 2002 through September 2009 — at a cost of $131,536. Attorneys at that firm, who declined to comment for this story, charged rates between $150 and $375 an hour.
Lundregan Law Offices of Salem submitted bills for 313 hours of work from January 2003 to September 2009 and collected $42,770. Neither attorneys William Lundregan nor Chris Casey returned calls seeking comment.
A Boston law firm, Richardson & Tyler, was paid $1,697 to devise the written agreement between the board and the Manchester Housing Authority outlining the single-day employee transfer program.
It is only the latest in a string of outrages over the board's pattern of doling out large sums to pricey law firms at taxpayer expense.
Board members approved about $50,000 in legal bills to defend Bassett against undisclosed allegations brought before the Ethics Commission in a case where no action has been taken so far.
They spent another $50,000 to sue the state in an unsuccessful attempt to keep Bassett on board as chairman after the state agency overseeing retirement boards voted to remove him. They also had paid lawyers $31,000 to construct Bassett's six-figure contract, which was then signed in a closed-door meeting.
The board even paid lawyers $10,000 earlier this year to contest a $1,000 fine from the Essex County district attorney's office for violating the Open Meeting Law. (The board lost and had to pay the fine, too.)
"I can't fathom some of the methods used by the board back then," Maylor said.
Even amid those expenses, however, the Manchester Housing Authority case stands out.
One-day jobs
Normally, the Manchester Housing Authority employs a part-time executive director, a part-time secretary and three maintenance workers. But on Dec. 31, 2002, a dozen public employees showed up to work at the agency, having been suddenly transferred for a single day before retirement.
Employment records for all 39 single-day transfers, which were obtained by The Salem News through a public records request, show the employees worked in positions created specifically for them and paid at the hourly rate of their full-time public sector jobs.
The former police chief of Georgetown applied to work "security" and "maintenance" and earned a rate of $33.65 per hour for eight hours of work. The former head of the Wenham Housing Authority applied for "one-day employment as director support consultant." A Salisbury custodian sought a job in "housekeeping."
The office would have been unusually full on days when transfers worked. Twelve of them punched in for their single day on the job on Dec. 31, 2002. About six did so Dec. 31, 2003, and another six worked Dec. 30, 2002.
"We did do work," said Carol Dispenza, a former Georgetown Public Schools tutor who held an office job at the Manchester Housing Authority for one day on Dec. 30, 2002.
Joanne Graves, executive director of the Manchester Housing Authority, insists the employees performed meaningful tasks that the agency wouldn't have had the staff or budget to tackle otherwise.
"There was a plan in place for what these people would do on that day," Graves said. "We have two computers, so somebody could be doing data entry. Someone could be filing in the filing room. There's a community room next door with a library. There's a kitchen."
Employees were compensated for their work but had to pay administrative fees of between $500 and $700.
Loophole in the law
Regardless, the real goal was to maintain the full Social Security benefits of their deceased spouses in addition to the government pension to which they were already entitled.
That's because a now-closed loophole in federal law allowed public employees to collect both benefits if they worked a government job that pays Social Security "on the last day of employment." Otherwise, their survivors' benefits would have been reduced by up to two-thirds.
By working their last day at the housing authority, the employees hoped they would qualify for the last-day exemption. The state retirement board, however, denied their request.
A lengthy court battle ensued, with appeals on both sides until a Superior Court judge finally ruled against the retirees in 2009, finding that the extra benefits would amount to "a windfall for employees that have never contributed to Social Security."
Graves argues the plan was allowable under federal law and that other states — such as Texas — successfully secured benefits for employees.
Dispenza, the Georgetown tutor, said the extra benefits would have made a significant difference in the quality of life for employees who made relatively little.
"The majority of people were not getting big money," she said.
That's part of what fueled the board's decision to pursue the benefits in court, board member William Martineau said.
"Hindsight is 20/20," Martineau said. "At that time, nobody knew it was going to drag on that long. As far as the board was concerned, it was a pretty clear-cut case. If it was good for Texas, the members of the Essex Regional Retirement Board should have the same benefit."
Since Maylor took over as chairman, the board has fired all of its lawyers and plans to advertise for a new general counsel. But he concedes there's still a possibility that a mysterious, outstanding legal bill from years past will once again resurface.
"Hopefully," Maylor said, "no public board should find themselves in this position again."
Staff writer Chris Cassidy can be reached at ccassidy@salem news.com.
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