Playing With Other People's Money Means Never Having To Say You're Sorry

The Michigan Municipal Employees' Retirement System is on a roll.  

It's a losing roll, but quite a roll nonetheless.

$155 million in losses -- in two transactions. 

The Detroit Free Press:  2 Swiss citizens caused $55M loss, municipal retirement manager says

A nonprofit corporation that manages employee pension funds for more than 1,000 Michigan local governments alleges it was defrauded out of about $55 million after entrusting the money to two Swiss citizens who weren't registered investment advisers.

The losses the Municipal Employees' Retirement System (MERS) suffered on investments in alternative energy projects — disclosed in a Sept. 30 lawsuit filed by MERS in federal court in Grand Rapids — are on top of $100 million MERS lost on a coffee-growing venture in Hawaii

That's $155 million lost in just two gonzo transactions that any responsible fiduciary would have not just walked away from, but ran. 

Why a Michigan entity tried to buy and run  a coffee plantation in Hawaii is  very questionable, but I'm sure the trips to Hawaii to look into it were great.

Don't worry, taxpayers will likely be picking up the pension losses for the government employees who lost money due to the ineptness of other government employees. 

Detroit Officially Goes Bankrupt

Detroit News: Detroit eligible for bankruptcy

A federal judge has ruled Detroit is eligible to file for the nation’s largest Chapter 9 bankruptcy to help dig out from under $18 billion in debt and that city pension payments can be cut to help make that happen.

Not only that, but the pension plans are also ruled to be fair game, as they

As Instapundit often says, something that won't go on forever, won't. 

Under-funded pension plan obligations that depend on other people's money will stop once they've run out of other people's money.  Detroit has now officially run out of other people's money.

Detroit's Politicians Did Dirty Deeds For Dirt Cheap

It's often said that the definition of an honest politician is a politician that once bought stays bought.

In Detroit, the amazing part is how little it took for the politicians to be bought to further corrupt schemes that siphoned and squandered hundreds of millions for the City's coffers.

The Detroit News has an interesting article on the corruption in the pension plans that led to an insanely risky deal that saddled the city pensions funds with debt while enriching the plan schemers.

Corruption alleged after Detroit pension deal: $200M loaned from 2006-09 tied to bribes, kickbacks, officials say

The amazing thing on reading the article is how little it took to get the Detroit politicians and officials to approve this corrupt deal:

Five of the eight Detroit Police & Fire pension fund trustees who voted to lend $10 million to Georgia businessman Roy Dixon have either been indicted, sent to prison or accused of taking cash or trips during a corruption scandal involving the pension funds.

They include:

Marty Bandemer: A former Detroit Police union president allegedly received $5,000 in cash from pension fund businessmen during a 2007 birthday party at the Atheneum Suite Hotel, according to court records. Bandemer also allegedly received $15,000 in casino chips from a pension businessman and a free trip from another to the Bahamas in 2008. Bandemer has not been charged with a crime.

Jeffrey Beasley: A former city treasurer and fraternity brother of ex-Mayor Kwame Kilpatrick was charged with taking bribes and kickbacks in a federal indictment in February 2012.

DeDan Milton: This longtime friend and executive assistant to Kilpatrick admitted taking about $16,000 in kickbacks in connection with two city land sales. He was sentenced to three years and six months in prison and released last month.

Alberta Tinsley-Talabi: She took a Caribbean trip, campaign cash and a donation from Dixon while supporting his $10 million city pension fund deal, according to prosecutors. She was later elected to the state House of Representatives and has not been charged in the ongoing corruption case.

Paul Stewart: A former vice president of the Detroit Police Officers Association. He allegedly received a $5,000 casino chip bribe; a Christmas basket stuffed with cash; $2,500 during a trip to New York City and $2,500 during a trip to Florida; and trips to the Bahamas and Naples, Fla., with his mistress — all from people doing business with the pension fund, according to the indictment.

It likely took less than $90,000 in bribes to get in one example of the corrupt deals, a $10 million deal approved.  That's quite a low expense and an excellent return on investment, and it shows you can purchase 5 Detroit officials on the cheap. That one deal is just the tip of the iceberg on a web of corruption that wasted hundreds of millions on top of a loss of billions in the risky deal.

Oh, and since this is being reported by the mainstream media, we have to play the game of "Name That Party".

All the officials hail from the same political party, and I'll even give you a hint - it starts with the same letter as Detroit.

Problem: Detroit's Pension Plans Badly Underfunded. Solution: Send The Trustees To Hawaii!

With pensions underfunded by at least $600 million, two of Detroit's public pension funds sent four trustees to Hawaii.

The Detroit Free Press: Detroit's pension boards pay $22K to send 4 trustees to Hawaii

Four trustees of Detroit’s two public pension funds are heading to a Hawaiian beach resort this weekend with their $22,000 tab paid for by the funds, which are mired in claims of mismanagement and said to be at least $600 million underfunded.

. . . .

Records obtained by the Free Press under the Freedom of Information Act show the expenses cover airfare — including a first-class flight for one trustee — lodging at the Hilton Hawaiian Village Waikiki Beach Resort in Honolulu, registration fees, meals and a per diem for miscellaneous expenses.

The Detroit pension plan situation is clearly desperate, but not considered serious by the trustees.

Of course, the trustees are just taking the President's cue about living large with lavish vacations to Hawaii at the public's expense, so can anyone truly blame them?

Public Sector Pension Follies: Wayne County Edition

As Instapundit often writes concerning the subject of public pensions: Something that can’t go on forever, won’t.

One can expect that the mess of a pension system in Wayne County (The County dominated by Detroit) similarly won't continue, unfortunately the taxpayer will likely be on the hook for the mismanagement and malfeasance.

After all, its only underfunded by $800 million dollars.

The Detroit News: Bad Wayne County pension bets take toll County retirement fund suffers investment losses of $340M since 2008

A $340 Million dollar loss isn't pocket change, and the article goes on to detail some interesting ways in which the money was lost, and the fund is performing worse than 97 percent of similar public funds.

As one would expect, not only are the pension funds badly managed and enmeshed in graft and corruption, but the incredibly rich benefits given to public employees with taxpayer funds will take their toll and make the fund unsustainable:

Pension board members said the system is strained because County Executive Robert Ficano's retirement incentives allowed workers as young as 37 to retiree with a $42,000 pension. In the last five years, the average annual pension has increased 30 percent to $23,145.

A lifetime pension of $42k per year to a 37 year old? Think about how much money that will be over the persons lifetime? With an average life expectancy of 78 years, that's $1,722,000.

Having the right connections in Wayne County and getting on the pension gravy train is the equivalent of winning a lottery, paid for by the public.

Any remaining questions as to why the Wayne County pension plan is under strain?