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I was elected by the voters of Orange County to be their fiscal watchdog.
That’s exactly what I’ve been striving to do this past year by questioning a very suspicious pension payout, nearly a quarter million dollars, with no back up, to Supervisor Shawn Nelson — who has very publicly stated he does not want to take a pension.
I have no ax to grind as to whether or not Supervisor Nelson or any other elected official should get a pension.
I don’t make the law on pensions.
My only concern and responsibility as the County Auditor-Controller is to make sure that any payment to any vendor or County employee is appropriate, legal and accurate.
The issue between my office, the Orange County Employee Retirement System (OCERS) and Supervisor Nelson is whether the request for a retroactive payment of $247,625 to Nelson’s OCERS retirement account is justified.
When Nelson was first sworn into office in June of 2010 to finish the term of Supervisor Norby, he signed up for the County’s most lucrative pension plan, 2.7% at 55. Two months later, in August of 2010, Nelson announced he had signed an irrevocable agreement to take no pension. Instead, he opted for an enhanced 401(a) retirement plan in lieu of a defined benefit pension.
Apparently his agreement to irrevocably opt out was acceptable to OCERS, the County Counsel, and Nelson as there was no issue between August of 2010 and now. OCERS held on to his money, but Nelson didn’t pay anything else into the plan. Then, in December 2014, (after Nelson had been re-elected to a second full term) OCERS apparently decided to refund Supervisor Nelson and Supervisor Bates for the money that had gone into the OCERS fund. In Nelson’s case it was for the 3 months Nelson was a member. Bates accepted the refund but Nelson refused.
Somehow the attempt to refund a few thousand dollars to Nelson turned into OCERS claiming Nelson had never left the pension system. Early this year, shortly after I took office, I was notified that not only was Nelson still a member of OCERS, but that he was owed retroactive county contributions, plus interest, going back to 2010 under the 2.7 plan he had originally chosen.
This was a highly irregular situation that in my view required much more backup than OCERS and Nelson’s word for it. County Counsel, which represents the Board of Supervisors, opined that the payment was allowable, but in court that opinion is just an opinion, it does not carry the force of law. The problem for my office is that I do not have the ability to hire outside counsel to represent the interest of the Auditor-Controller’s office. County Counsel is supposed to advise me, but he is an employee of the Board of Supervisors – a clear conflict of interest.
To justify the payment, I requested documentation from both Supervisor Nelson and OCERS pertaining to his withdrawal in August 2010. Both acknowledged it existed but refused to provide it. The only documents I received were two memoranda showing a “settlement agreement” reached between County Counsel, OCERS and Nelson. There is a County resolution that requires County Counsel to obtain the approval of the Board of Supervisors on any settlement agreement in excess of $75,000. Therefore I requested the Supervisors vote to authorize the $247,625 settlement to be paid to Nelson. Again, I was told that since the OCERS Executive Committee had approved the agreement there was no need for the Supervisors’ approval.
By July, I was promised the documentation would be forthcoming along with a check request for the first installment of $88,117, the first of four annual installment payments. Instead, surreptitiously, CEO Budget processed a journal voucher entry from Nelson’s 4th District budget account into OCERS payroll account that would have gone unnoticed had one of my managers not caught it.
I believe the funds were illegally transferred in a highly unorthodox manner so I directed staff to reverse the entry. A few days later, while I was out on planned medical leave, OCERS made an outrageous claim that we had “embezzled” funds and contacted the DA’s fraud unit who sent investigators to my office. Staff explained the situation and we have heard nothing more from the District Attorney’s office. Since I was unavailable at the time, my staff was placed under extraordinary pressure from the CEO, County Counsel and OCERS. One of my staff was told by the County Counsel that if she didn’t authorize payment, she should get her own criminal lawyer. Ultimately, in my absence, my executive management team agreed to let CEO transfer funds to the retirement account for the first installment after indemnifying this office.
Recently, we received notice that instead of a payment plan extending to the end of Nelson’s term in 2018, OCERS is now requesting payment of the balance, $143,517 by October 31 of this year. I continue to believe that this is an improper and possible “gift of taxpayer funds”.
Incidentally, no mention of the recent countywide Ballot Measure B, which was co-authored by Nelson, was ever given as an official reason to justify the retroactive payments. Measure B requires all Supervisors to take the lower 1.62% retirement plan. The ballot measure does not provide an option to opt out of the pension plan altogether. Neither was any IRS or other state or federal laws referenced as justification. The first I heard of these rationales was from reporters covering the revelation about the retroactive payments.
This country was founded on a system of checks-and-balances, not just in the Federal government, but all the way down to the local level. An independently-elected Auditor-Controller is an essential part of that equation. In fact, independence is even more important locally because often the Board of Supervisors acts as both the legislative branch (creating laws/ordinances) and the Executive Branch (implementing policy). For more than 20 years, the Office of Auditor-Controller did not perform its independent oversight function.
I ran for Auditor-Controller to change this and I take my responsibility to the taxpayers very seriously.
Eric Woolery is Orange County’s elected Auditor Controller.