CONFLICTS & CONTROVERSY PLAGUE YEAR-OLD CRIMINAL INVESTIGATION OF LT. GOV. GUADAGNO & $245K PENSION SCAM Investigative Report by Mark Lagerkvist

Posted on May 14, 2012

 

Tick. Tick. Tick. Tick…

Is it the sound of time passing on a conflicted, year-old criminal investigation of an alleged $245,000 pension fraud involving New Jersey Lt. Gov. Kim Guadagno?

Or is it the countdown to an embarrassing scandal for her boss, Gov. Chris Christie — a rising political star who declared pension reform as his “biggest governmental victory?”

As a county sheriff in 2008, Guadagno made false statements to enable her chief officer to pocket nearly $85,000 a year in retirement pay while drawing an $87,500 annual salary. The double-dipping scheme first was reported by New Jersey Watchdog in 2010.

The state’s investigation is assigned to the Attorney’s General’s Division of Criminal Justice, a unit where Guadagno once served as deputy director. Despite the apparent conflict, Christie has not appointed a special prosecutor.

A spokesman for Christie and Guadagno refused comment. The Attorney General’s Office did not respond to questions.

Public pension abuses are so rampant in New Jersey that even the agency investigating Guadagno has its own controversy.

Twenty-three supervisors and investigators for the Attorney General and DCJ are using legal loopholes to draw salaries and pension pay, New Jersey Watchdog found. On average, each pockets $164,000 a year — $96,000 in salary and $68,000 in pension.

Most “retired” for just one night. Those officers left their positions with the Attorney General only to return to the same employer the next morning with new job titles — and two paychecks instead of one.

In a continuing series of investigative reports, New Jersey Watchdog exposed similar double-dipping practices involving 125 officers employed by prosecutors, 18 officials from a state Homeland Security Unit and 44 county sheriffs and undersheriffs — in addition to the Guadagno story.

State Sen. Fred Madden is a “triple-dipper” who collects more than $241,000 a year from public coffers — $49,000 as a legislator, $106,983 as a police academy dean and an $85,272 pension as a State Police retiree.

“I don’t have a problem with it at all,” said Madden.

The Guadagno Controversy

While Madden and others profit from loopholes in pension rules, the circumstances surrounding Christie’s second-in-command raise questions of fraud and deception.

Guadagno was elected sheriff of Monmouth County in 2007. She previously worked as an assistant U.S. attorney and as an assistant New Jersey attorney general. From 1998 to 2001, Guadagno served as deputy director of the DCJ — the unit now assigned to investigate the case in which she’s a major figure.

In 2008, Guadagno hired Michael Donovan Jr., a retired investigator for the county prosecutor, as the sheriff’s “chief of law enforcement division.” She announced the appointment in a memo to her staff.

But there was a problem. As a sheriff’s officer chief — a position covered by the pension system — Donovan would be required to stop receiving pension checks and resume contributions to the state retirement fund.

Guadagno fudged the job title, so Donovan could double-dip. In county payroll records, the oath of office and a news release, Donovan was called the sheriff’s “chief warrant officer” — a low-ranking position exempt from the pension system.

A chief warrant officer oversees the service of warrants and other legal documents. In contrast, the sheriff’s official website identified Donovan as “sheriff’s officer chief,” supervising 115 subordinate officers and 30 civilian employees.

On Guadagno’s organizational chart, Donovan was listed as chief of law enforcement — and the position of chief warrant officer was conspicuously absent.

The ruse allowed Donovan to collect an $87,500 salary from Monmouth County in addition to an $85,000 pension as a retired county employee.

A Conflicted Investigation

When Guadagno was elected as Christie’s running mate in the 2009 election, she resigned as sheriff.

In 2010, state Treasury pension officials began to ask Monmouth County about retiree Donovan’s employment. “I would respectfully request that former Sheriff Guadagno be contacted…” replied her successor, Shaun Golden, in a letter forwarded to the Treasury.

The Treasury denied the existence of any correspondence or email contact with Guadagno or Christie regarding Donovan. Officials also rejected requests for records of the Treasury’s inquiry.

In response, New Jersey Watchdog filed a formal complaint with the state Government Records Council, a body solely consisting of gubernatorial appointees and cabinet officials. One year later, the council has yet to render an advisory opinion.

Meanwhile, the state Police and Firemen’s Retirement System’s Board of Trustees took action of its own.

“It’s a double-whammy,” said PFRS chairman John Sierchio. “If you’re going to retire under one job title and come back under another title, we have a problem with that. The chief of sheriff is a covered title under the pension system — and they should be contributing instead of drawing out.”

The PFRS board voted in May 2011 to call for a criminal investigation of Donovan and parallel instances involving John Dough, of Essex County, and Harold Gibson, of Union County. The case was referred to DCJ.

However, the investigation is riddled with a maze of potential conflicts of interest:

  • DCJ is probing allegations involving its own former deputy director, Guadagno.
  • Nearly two dozen DCJ investigators and supervisors are “double-dippers” who collect state paychecks and pensions.
  • Attorney General Jeffrey Chiesa, a Christie appointee, is ultimately in charge of the probe of fellow cabinet member Guadagno. Chiesa is also former chief counsel to Christie.
  • Despite evidence of possible wrongdoing by his lieutenant governor, Christie has not appointed a special prosecutor or authorized an independent investigation.

One year later, the PFRS board remains in the dark. “I keep asking, but we haven’t been told anything,” said Sierchio.

Sean Conner, a spokesman for Christie and Guadagno, refused to listen to questions about Guadagno’s role or the need for a special prosecutor.

“Let me stop you right there,” Conner told New Jersey Watchdog. “If it was referred to DCJ, you need to call DCJ.”

The Attorney General’s Office did not respond to questions about the investigation.

Back in Monmouth County, Donovan has another new job title — but he’s still a double-dipper. In February 2011, Golden named him undersheriff in charge of law enforcement — a strikingly similar position, but one apparently exempt in the labyrinth of pension rules. Donovan currently gets an $86,000 annual pension on top of his $92,000 salary.

While sheriff’s chief, Donovan pocketed $227,000 in retirement checks. Since he did not re-enroll in the pension system, he avoided $18,000 in contributions to the retirement fund. If state authorities ultimately determine Donovan violated pension rules, he could be forced to repay $245,000.

Reform…Except for Double-Dipping

Pension fraud and widespread abuse are nothing new in New Jersey.

The federal Securities and Exchange Commission accused New Jersey of pension fraud in 2010. It was the first time the SEC had taken action against a state government over public pension funds.

According to the SEC, New Jersey misled its bond investors from 2001 to 2007 by failing to disclose it had not met its obligation to fund public workers’ pension funds. The lawsuit was settled with a cease-and-desist order, which the state accepted without admitting or denying the charges. The alleged fraud occurred on the watch of four previous governors.

Facing a $45 billion pension shortfall when he took office, Christie spearheaded reform legislation that took effect last year. He called it his “greatest governmental victory.”

The sweeping new laws increase employee contributions, decrease benefits for future retirees and halt cost-of-living increases for pensioners. According to Christie, the changes should save New Jersey $120 billion over the next 30 years.

“We are putting the people first and daring to touch the third rail of politics to bring reform to unsustainable system,” stated Christie in a news release.

But the reform did little to stop double-dipping by numerous public employees, including Christie’s own deputy chief of staff.

Louis Goetting collects $219,000 a year from the state — a $130,000 salary as a top aide to the governor plus $89,000 in state pension payments from an early retirement deal. Christie hired Goetting in 2010 as a budget guru to help trim the cost of government.

In addition, Goetting (pronounced “getting”) received two golden parachutes from public coffers before joining Christie — severance packages of $190,000 from Brookdale Community College in 2009 and $180,000 from University of Medicine and Dentistry of New Jersey in 2002.

The bottom line: Goetting has gotten more than $1.1 million in pension and severance pay — and he still draws a six-figure salary from the state.

In answer to questions about Goetting’s double-dips, the governor’s press office has reiterated a statement Christie issued last year: “There is no one in my administration, myself included, who understands about the operation of this government better than Lou Goetting does. And so the people of New Jersey have gotten an incredible bargain.”

Public pension reforms will not be complete without an investigative staff to monitor potential abuses, according to PFRS chairman Sierchio. He noted there are 275,000 retirees — but no investigators assigned to review complaints.

“We don’t have anybody watching the store,” said Sierchio. “We’ve got an $80 billion pension system, and nobody to investigate anything. Once you get your pension, you never have to look over your shoulder.”

 

Chief Donovan takes an oath, witnessed by his mother, Emily, Guadagno and the Hon. Lawrence M. Lawson

 

Posted under Big Stories, New Jersey, New Jersey Watchdog.

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