By Steve Landwehr
A state audit of the Essex Regional Retirement Board, released this week, reveals a board operating in a world of clandestine meetings, with members reimbursing themselves and employees for legitimate and improper expenses, and doling out legal and consulting fees without a contract and without seeking competitive bids.
The unprecedented list of 23 "deficiencies" enumerated by the Public Employee Retirement Administration Commission, which oversees state retirement systems, paints a picture of a board that has for years behaved as though it answered to no one, and an executive director and chairman, Timothy Bassett, who personally authorized more than $100,000 worth of legal bills, without proper approval and without any explanation of what services were provided.
Auditors considered that action so serious it has been referred to the Attorney General's Office.
Questionable practices of the board, audited from January 2006 through December 2008, also include shoddy bookkeeping, nonexistent or secretly kept records and misuse of retirement funds, according to the audit.
"It's the most comprehensive set of findings since I've been here," said Joseph Connarton, PERAC's executive director since 1999.
While most audits uncover a few shortcomings in internal controls and procedures, this one passed into "uncharted territory," according to PERAC staff attorney Derek Moitoso, who has been monitoring the board on site for several months.
Bassett did not respond to messages left at the board office and his home.
'Shattering public trust'
Connarton said the most disturbing findings were the number of blatant violations of the Open Meeting Law, and state Sen. Bruce Tarr agreed. Tarr, a Gloucester Republican, has introduced legislation that would put the Retirement Board under the control of a receiver and dismiss all current board members.
"They have the effect of shattering the public trust," Tarr said of the secretive meetings and closely guarded documents.
"It seems systemic," he said. "What were they attempting to conceal?"
Missing documents
Despite assurances from the Retirement Board that auditors would get full cooperation, Moitoso said, they were repeatedly stymied in their requests for documents.
In one instance, Bassett ultimately did turn over some board records related to his own compensation, purportedly retrieved from a safe deposit box in Marblehead, where he lives.
"I don't get it," Connarton said of the board's secrecy. "Their response (to requests for paperwork) is often that they need to talk to legal counsel. They're a public entity; they should provide this information to anyone who asks."
To date, documents have not been provided to account for $132,000 divvied up between four law firms in one of the most significant allegations of possible misconduct in the audit.
Any board check for more than $10,000 requires two signatures, yet it appears Bassett alone signed at least four checks to three firms totalling more than $132,000. Two worth $60,760 went to Casey and Lundregan, one was to Dwyer and Collora for $50,812, and another to Laredo and Smith for $20,541.
According to the audit report, "The COO (Lilli Gilligan) refused to sign the checks because the vouchers had not been included on any approved warrant and ratified by ERRB." In other words, there was no proof the board had ever approved the expenses.
Although Bassett told Gilligan the approval had come during an executive session — which would have been a violation of the state's Open Meeting Law — she still refused to sign the checks because there was no documentation indicating what services had been provided.
Next, according to the report, Bassett tried to get Roberta Josephson, then the board's Advisory Council appointee, to sign the checks, but she refused.
Gilligan subsequently told auditors, who still did not have the requested documentation, that "bank statements" indicated the checks had been signed only by Bassett.
"It's troubling, to say the least," that documentation has still not been provided, Moitoso said.
The Retirement Board's written response to the finding in part cited a commitment to developing policies that more clearly govern the proper use of signatures on checks, and to make sure their banks understood them.
But PERAC noted the board did not dispute its basic findings, nor had it yet responded to the requests for documentation.
'Never seen that before'
That wasn't the only time Bassett acted on his own authority.
Auditors discovered two wire transfers, each for $83,400, used to purchase an annuity for Bassett. Bassett alone authorized the money transfers, and there is no evidence the board ever voted to approve the transactions.
Not only is that a violation of state law, the audit said, but two board members — neither of them Bassett — should have authorized the payments.
"Unauthorized wire transfers? We've never seen that before," Moitoso said.
Bassett announced last summer, as the board was under fire from member communities, including Rockport, Essex and Manchester, that he would forgo the annuity, which would have provided $500,000 for his retirement, in addition to his state pension.
Auditors also found numerous instances that indicated board members were either ignorant or dismissive of the Open Meeting Law, regularly retiring behind closed doors to discuss everything from their operating budget to employee compensation, both of which should have been considered in open session.
During one secret meeting on Sept. 30, the board set up Bassett's lucrative salary formula, which is tied to the salaries of the two highest paid town administrators in the retirement system.
What's more, during the same session three of the five board members, including Bassett, approved a 1 percent bonus for any employee who did not take advantage of the board's health insurance plan.
"(Bassett) was eligible for and ultimately received the 1 percent bonus," according to the report.
The Retirement Board responded to the allegations of Open Meeting Law violations with repeated statements it intends to make sure members and employees are fully trained regarding the requirements of the law.
Improper travel expenses
The state commission ordered the Retirement Board to immediately end several practices uncovered by the audit.
Board members repeatedly reimbursed themselves and employees for travel and business expenses that were prohibited by the board's own policies and the Internal Revenue Service.
"That's enormous," Moitoso said of the number of expense account irregularities. "We've seen something like this before (in other audits), but not to this extent and gravity."
The Retirement Board agreed it needed to improve its internal controls regarding reimbursement for expenses.
Staff writer Steve Landwehr can be reached at at slandwehr@gloucestertimes.com.
Officials again call for Bassett removal
Local town officials were among the earliest critics of the Essex Regional Retirement Board and its executive director and chairman, Timothy Bassett.
They've been upset by various board activities for well over a year, but even they were surprised by the extent of the problems uncovered by the Public Employee Retirement Advisory Commission's audit.
"I'm seething," said Middleton Town Administrator Ira Singer, who hadn't even finished reading the findings of the audit. "I am absolutely just shocked.
"He should resign immediately," he said of Bassett.
"I'm flabbergasted," Boxford Town Administrator Alan Benson said.
"I don't know how anyone can have confidence in that board anymore," Ipswich Town Manager Bob Markel said.
Town officials' complaints have been heard on Beacon Hill, where state Sens. Fred Berry, D-Peabody, and Bruce Tarr, R-Ipswich, have introduced separate bills aimed at reforming the retirement board.
Tarr's bill, which Berry has endorsed, is the most sweeping, calling for an appointed receiver to immediately assume control of the Retirement Board. It would also kick all current board members out of office, though they would be eligible to run for election again.
"I think this makes a compelling case" for takeover of the board, Tarr said. "We need decisive intervention."
Manchester Town Administrator Wayne Melville expressed not just outrage, but dismay at Bassett's seeming ability to hold onto power on what some have called an out-of-control board.
"I'm becoming disgusted with the public sector if we can't take care of something like this," he said. "There's got to be a way."
— Steve Landwehr
