Pension board asks for bill veto

Schaefer pushes request to overturn Assembly's restructuring of panel

Move seen as gesture of defiance

April 16, 2003|By Michael Dresser | Michael Dresser,SUN STAFF

Led by an irritated Comptroller William Donald Schaefer, the state's retirement fund trustees formally asked Gov. Robert L. Ehrlich Jr. yesterday to veto a bill passed by the General Assembly adding financial expertise to the pension board.

The trustees' 9-4 vote to seek a veto of the legislation - passed in the aftermath of an embarrassing scandal and poor investment performance - represents a public gesture of defiance toward the retirement system's legislative overseers.

Among those backing the resolution were two trustees who would be removed from the board under the bill - State Police Superintendent Col. Edward T. Norris and state schools Superintendent Nancy S. Grasmick.

The trustees' potentially inflammatory move was accompanied by a conciliatory gesture: hiring a well-respected Annapolis veteran to lead the troubled state retirement agency.

Thomas K. Lee, deputy budget secretary under Ehrlich and former Gov. Parris N. Glendening, will become executive director of the $25 billion system after finishing his current duties. The system provides benefits for 89,000 retirees and has 186,000 active members.

Lee, 39, is a former legislative analyst with strong ties to lawmakers and pension board members. He replaces Peter Vaughn, who retired on a medical disability last year after Schaefer expressed dissatisfaction with his performance.

One of Lee's most challenging tasks may be dealing with the aftershocks from the board's action yesterday, which a leading legislator called "incredible."

The board acted after Schaefer lashed out at Sen. Edward J. Kasemeyer and Del. Mary-Dulany James - co-chairs of the Assembly's Joint Committee on Pensions.

The comptroller, who had asked the Assembly to hold off on legislation this year, said the two lawmakers were too eager to pass a bill this session.

Schaefer, the pension board's chairman, accused Kasemeyer of being "so emotionally involved" in the issue. "He made up his mind that he was going to pass a bill and he did it based on a newspaper article," the comptroller said.

Kasemeyer called a hearing last year after The Sun reported that the pension board allowed Baltimore investment banker Nathan A. Chapman Jr. to continue to employ New York money manager Alan B. Bond to manage state pension funds - even after Bond was indicted on fraud charges in December 1999. Bond would go on to defraud the Maryland system out of millions in a separate scheme that came to light in 2001.

That article followed reports that Chapman had allowed managers he hired to invest pension money in his own companies and that the Maryland system's overall investment performance ranked among the worst in the country in peer group rankings.

Soon after the hearing, the pension committee recommended a sweeping overhaul of the board. The final bill was scaled back, but it still would add expert members while removing two busy state officials - the superintendents of education and state police. The bill also would replace one of the two police-elected trustees with a financial professional.

The bill passed the Senate unanimously and was approved by the House, 140-1.

Trustee G. Bruce Harrison, who represents the state police, said the bill gives too may appointments to the governor. "It would set this board up for significant corruption if we ever got another governor who wanted to load up the board," he said.

But William Brown, who represents public school teachers, warned trustees they were making a serious mistake. "The legislature giveth, the legislature taketh away," he said.

Treasurer Nancy K. Kopp, a former delegate who is elected by the legislature, agreed that the resolution was a bad idea. "I didn't think it was an appropriate thing for this board to ask for a veto because people would perceive that the board was opposed to change," she said.

But Schaefer was defiant.

"Let Kasemeyer come up and run this place as the sole dictator," the former governor said. "I will take the rap from the legislature and I will give them the rap back."

Kasemeyer, a Howard County Democrat, called the board's action "unbelievable and incredible" and predicted that it would have a negative effect on the retirement system's relationship with the Assembly.

"I'd think that they'd be happy that there wasn't more of a reaction to poor judgment, wrongdoings, failed systems," Kasemeyer said.

Shareese N. DeLeaver, an Ehrlich spokeswoman, said yesterday the administration has not taken a position on the bill.

However, Ehrlich's two appointees on the board - Norris and Budget Secretary James C. DiPaula Jr. - both voted with Schaefer, and the comptroller enjoys a cordial relationship with the governor.

Kasemeyer said there's a good chance that any veto would be overridden.

While the senator criticized the board's veto recommendation as "self-serving," he praised its hiring of Lee. "He has a great background. I think he understands the relationship of the pension board and the legislature, which I think is a help," Kasemeyer said. "There's no question he's a man of integrity and a quality individual."

Lee's salary is to be determined. Vaughn earned $119,657 when he resigned last year.

Lee is known as a solid technocrat with the ability to work cordially with strong-willed leaders without being drawn into their disputes.

When he represented Glendening at the Board of Public Works, he managed to retain the admiration of Schaefer, Glendening's chief tormentor.

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