The former executive director of the Municipal Employee Retirement System and the state agency’s board of trustees may have violated state law and the governmental code of ethics when they spent more than $300,000 on various conferences, expensive dinners with alcohol, cocktail parties and travel, according to a Legislative Auditor’s Office investigative audit released Monday.
MERS Executive Director Robert Rust resigned from his post in June, amid allegations about excessive spending for meals and out-of-state trips initially raised in a WVUE-TV report. Rust denied any wrongdoing at the time of his resignation, and maintained that position in a letter from his attorney to the legislative auditor.
MERS is the pension system that handles benefits for about 11,000 people who work at or retired from about 150 municipal governments around the state, including Lafayette, Carencro, New Iberia, Gretna, Covington, Hammond, Denham Springs, Central and Zachary.
Among the findings, the auditor took issue with some $317,379 of pension system funds tapped for state conferences and in-state meetings for the board of trustees and employees planned by Rust. MERS also paid a $42,698 cancellation fee to cancel an out-of-state conference in June 2015.
“It appears that the Board had knowledge of, and/or approved, each of these meetings and conferences as well as the 2015 conference cancellation,” the report stated. “It further appears that a portion of the $317,379 and the $42,698 cancellation fee did not benefit the system or its members.”
The expensive cancellation fee, ironically, stemmed from the board’s decision to cancel the conference due to the negative publicity surrounding the allegations of excessive spending. Acting Director Warren Ponder said MERS was still on the hook for about 90 percent of the costs for the conference because they canceled so late.
The report also took issue with the generous use of dollars for travel.
“MERS provided attendees at MERS’ out-of-state conferences with expensive dinners, cocktail parties, transportation to and from local restaurants, and in some cases, gifts,” the report stated. “MERS also provided attendees’ guests (including family and/or friends) with breakfasts, lunches, dinners, cocktail parties, and transportation free of charge.”
The report stated Rust allowed attendees to arrive one or more days early to the conference locations at MERS’ expense.
Rust also used system funds to provide hotel stays for his sons at out-of-state conferences “with no apparent benefit to the system of its members,” the report says. He also rented a vehicle to drive to the conferences and meetings, but the rentals began “several days before and ended several days after the conferences and meetings took place.”
System dollars were also used for expensive dinners with alcohol, the audit found. The report said money was spent on meetings held in December 2010, 2011, 2012 and 2014 that were actually Christmas parties.
The report recommended that MERS consult with its attorneys to determine if it should reimburse the system for the costs of the expenditures named in the report.
MERS also paid for Rust’s cellphone from January 2010 through June 2015, which included an additional cellphone he used for his son. Rust reimbursed $3,413.23 in eight separate payments for his son’s portion of the bill, but the report stated that in some cases, Rust did not repay MERS until 13 months later.
Rust has argued that the dollars he used for many of the uses called into question came from an Educational Conference Account he created, with the board’s approval, to raise private dollars for the educational training. MERS received more than $200,000 in contributions for the fund. Most of the contributors were from investment firms that contract with MERS.
The Legislative Auditor’s report disagreed that the funds raised were private in nature.
“Our research failed to indicate any provision of law that allows funds held by a public retirement system to be private funds,” the report said.
Rust’s attorney, Jack Dampf, wrote a letter to Legislative Auditor Daryl Purpera disputing the findings, arguing that the funds raised by private companies were allowable for the expenditures.
“No one who attended these annual conferences believed that spending the donated funds and budgeted funds for the conference was improper,” Dampf wrote, adding that most of the Board of Trustees were elected officials, staff of the state Treasurer’s Office and legislators.
He said the board was fully aware Rust was planning the conferences.
“If the board felt that these trips were improper, they had a duty not to approve them,” he wrote.
Ponder said that since the allegations surfaced, MERS has implemented a variety of new policies that tighten standards for travel, credit cards and reimbursement spending. He said the agency will retain outside counsel to review the findings and determine if the board needs to reimburse MERS for expenditures.
“I took this audit report as something of a tool to make the system better,” Ponder said. “We are a stronger system as a result. But of course, you never want to see any negative publicity like this.”