The head of a pension system for about 150 municipal governments in Louisiana quit Thursday under fire for allegedly misspending retirees’ money.
Municipal Employee Retirement System Executive Director Robert Rust submitted a lengthy resignation letter in advance of a pension board meeting where he was supposed to respond to allegations of excessive spending for meals and out-of-state trips.
Rust did not attend the meeting. He was put on administrative leave earlier this month after the board learned he had taken records home.
His letter stated that board members were among the attendees at the expensive dinners and that no one looking at the system’s books had ever questioned the expenditures.
The board meeting for the Municipal Employee Retirement System, or MERS, went on as scheduled with the pension plan’s acting director, Warren Ponder, detailing Rust’s unfettered use of system credit cards. Rust both incurred and approved the expenses for payment — sometimes not submitting receipts.
“That’s no longer the case,” Ponder said, adding that three of the MERS credit cards have been canceled.
“Since June 5 we have put checks and balances in our system,” Ponder said.
The allegations against Rust surfaced in a WVUE-TV report in May with the board launching an internal investigation and bringing in the Louisiana Legislative Auditor.
“All this money belongs to the retirees. Every penny spent on food, liquor, staying at the resort, gift baskets,” State Treasurer John Kennedy, a member of the board, said at Thursday’s meeting.
The “cavalier fashion” in which the money was spent is “unethical … illegal,” Kennedy said. “I think the legislative auditor is going to back me up.”
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.
Ponder said MERS’ records are incomplete on the spending, such as the $1,547 bill at the Palace Cafe in New Orleans or the $2,900 spent at Ruth’s Chris Steakhouse in Baton Rouge.
“We just don’t have a lot of contemporaneous records,” Ponder said, including who dined and the purpose of the dinners.
Also under the miroscope are reimbursements to Rust for two trips to the beach described as planning excursions for a MERS educational conference. The trips occurred around holidays. MERS members are required by law to participate in educational seminars related to investment, actuarial science and law, rules and regulations related to its operation.
Ponder said MERS found that Rust rented a three-bedroom, three-bath house at the Sandestin Golf and Beach Resort at Miramar Beach, Florida, for four days at a cost of just over $2,000. Rust and four other people stayed in the house, Ponder said records of the resort revealed. Who stayed with Rust is not known, he said.
Records also show a visit to Grand Hotel Marriott Resort, Golf Club & Spa in Point Clear, Alabama.
“I can see no legitimate business reason for having a educational conference at the Grand or Sandestin. It’s all about how it looks,” Covington City Councilman Mark Wright told the board. “Abandon this conference.”
“We have canceled the conference, Mr. Wright,” MERS Board Chairwoman Claire Sarradet responded.
Under Rust, MERS started soliciting contributions to cover expenses of the educational seminars from those who do business with the system and those who would like to, Ponder said.
Those funds were tapped to pay for certain expenses outside the conferences, such as for liquor at dinner meetings.
“You should not take one dollar from any of these investment companies,” said meeting attendee Rick Franzo, with Concerned Citizens of St. Tammany. “They could have undue influence on your decisions.”
Democratic Rep. Sam Jones, a member of the House Retirement Committee and former mayor of Franklin, criticized the cozy relationship between those who donate for the educational conferences and those who are trying to sell the system an investment product.
Jones pointed to MERS’ loss of $40 million as a result of an investment made several years ago in a New York-based hedge fund managed by Fletcher Asset Management. The investment was pushed by Joe Meals, who had helped fund an education conference.
“Someone should go to jail,” Jones said. “We need to have an iron curtain between some people peddling this stuff and future boards.”
Board member Ronnie Harris said a lawsuit has been filed against Fletcher Asset Management, as well as the accounting firm Grant Thornton, Meals and Consulting Services Group, the investment consulting firm that employed Meals.