Tuesday, May 19, 2009

Milwaukee County and Mercer Settle the Pension Lawsuit

By Lisa Kaiser
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Is our long countywide nightmare finally over?

Milwaukee County and human resource consultants Mercer Inc. agreed to a $45 million settlement and the county is dropping its claims that Mercer didn’t warn the county about the full cost of a pension plan approved in late 2000.

The county expects to keep about $32 million of the settlement, which would go toward the pension fund.

Milwaukee County was the first entity to use a lump-sum backdrop. The county says that Mercer claimed it would only have cost about $718,000 per year; so far it’s cost $144 million for 1,150 people, the county’s attorney argued in court. And about 3,000 more people are eligible for it in the future. Costs may rise as high as $325 million when all is said and done.

Mercer argued that the county had never asked for a full estimate of the costs, and a former county official, Gary Dobbert, had assured the supervisors and pension board that costs were manageable.

So the county will pocket about a tenth of the pension plan’s cost, while Mercer will admit no wrongdoing.

Milwaukee County Executive Scott Walker and Board Chair Lee Holloway issued a joint statement on the deal, noting that “the $45 million payment from Mercer, Inc., is among the largest recoveries of its kind by a government entity based on claims of actuarial malpractice.”

They said they’re happy with it: “We are very pleased with the recovery of these funds—and the recovery of the truth—in this case.”

Mercer, for its part, released its own statement on the settlement:

"As part of the settlement, Mercer acknowledges no wrongdoing in this matter and, in fact, continues to believe that the lawsuit was without merit. From the outset of this litigation, we have strongly believed that the quality of our work on behalf of Milwaukee County met all applicable professional standards. However, given the uncertainty of trial outcomes involving complex technical matters, we believe that reaching a resolution was prudent and in the best interest of our shareholders, clients and employees."

So is this a big win for the county? Or Mercer?

Hard to tell.

Walker made a career out of bashing the supervisors (and his predecessor) for voting for the pension plan. Then he allowed this case to go forward, basically agreeing that Mercer hadn’t given the supervisors enough information to make an informed decision. Ummm… that’s a little twisted. But no doubt Walker will portray this as a big win during his campaign for governor. And think—Walker actually had to work with big city trial lawyers! Don’t Republicans think that they’re the bad guys?

But did we "recover the truth," as Holloway and Walker say, even though the case was halted mid-trial? It’s pretty safe to bet that the deal would not have gone through if the full costs had been known at the time of the vote. And Mercer should have realized that the proposed backdrop would become crushing. But the jury didn't get to hear all of the testimony on where it all broke down, and why.

I was able to sit in on the opening statements of both attorneys two weeks ago—after being called in for jury duty in federal court just days before. (I wasn't surprised that I didn’t even get queried during voir dire and never got close to sitting on the jury.) Personally, I think the county’s attorney, Ken McNeil, did a good job of making this very complicated case easy to understand. He also had some very damning videotaped testimony from Mercer’s number crunchers and audiotape of the same actuaries speaking to the pension board before the vote, assuring them that everything was fine.

Mercer’s attorney, on the other hand, seemed to be going for a death by a thousand cuts, trying to undermine the county’s case by poking at details, details, details, sowing doubt, and accusing county officials of acting in their own self interest and creating a pension plan that would make them very, very rich. We’ll never know how a jury would have responded to those arguments. But will the settlement stop the debate over the pension scandal outside of the courtroom? Stay tuned.

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