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HomeMy WebLinkAbout2005 08 31.notes.Board of Ethics SPECIAL MEETING AUGUST 31, 2005 COMPLAINT #2005-1 PRESENT: Ellen Sullivan, PhD, Chair Ron Frybort Jason Amen Hetep Mary Estes Rev. John Folkers, Vice Chair David A. Merchant II ABSENT: Rev. LaSandra Jones OTHERS PRESENT: City Clerk Miner, Deputy City Clerk Griffin, Deputy City Attorney Roberts, City Attorney Novak PUBLIC COMMENT: Chairperson Sullivan asked if anyone present at this meeting is representing the complainant. There was no response. Chairperson Sullivan asked if anyone present is representing the subject of the complaint. City Attorney Novak indicated that he is present to represent Glenn Kirk who had a scheduling conflict and could not attend in person. Mr. Kirk has sent the message that he would be happy to meet with the Board at another time, should they find it necessary. Attorney Novak stated that he is aware of this case because a similar threat of lawsuit has been filed in the City Attorney’s Office, stating that litigation may be filed on behalf of a former city employee who was fired. This first came to his attention and to Mr. Kirk’s attention around July 8, 2005 when they received a letter from Mark Canady, legal counsel to Jeff Burnham. The letter from Mr. Canady stated that if Mr. Burnham was not immediately reinstated to his position they would file a ‘whistle blowers’ suit on his behalf. This information has been distributed in several forms; at Teamster meetings and in the form of a letter filed in the City Attorney’s Office. To date, no lawsuit has been filed against the City, though it is still possible that one will be filed. The Board should keep that in mind while deliberating on this issue. Allegations of activities under the whistle blower act are taken very seriously and are usually referred to outside legal counsel. That is what they did in this case on July 8, 2005 when they received the letter from Attorney Canady it was referred to Foster, Swift, Collins & Smith. They have made requests to them in writing regarding the issues brought up by Attorney Canady on Mr. Burnham’s behalf. Their review is ongoing. As the Department Head, he would be the individual who is presumably getting benefits that are referred to in the letter from Mike Parker in which he alleges that all directors are getting benefits 5% higher than their annual salaries. In this discussion he must raise the point that, in that respect, he has a conflict for purposes of giving legal advice on this issue. The Charter creates a specific exemption in section 5-501.1 when they relate to compensation, otherwise, the Attorney and Finance Director could never be involved in negotiating contracts for employees. This fundamental complaint raised is that Department Heads back in March 2005 voluntarily reduced their pay by 5% and as a result one of the things they should have done is to also reduce, for purposes of compensation on which retirement is based. They should have reduced it there as well. Because they did not do that, it results in an illegal retirement inducement that is higher than it would otherwise have been. To the extent that anyone considers this would be an ethical violation, Department Heads would be willing to take back the 5% of their salaries that they returned. There are however, wrinkles in manner. When this discussion took place with department heads, they were willing to give back 5% of their retirement also. Mr. Kirk is not subject to this, because he is not vested in the retirement system, and when he becomes vested, any retirement would not include the year in which that 5% was at issue. Part of what led to the initial conclusion that department heads could give back 5%, but not be hit by a retirement decrease was his experience at the State of Michigan where they looked at furlough days for employees and determined that compensation would not affect their retirement situation. They have made disclosures of all of this to outside counsel. They have discussed a couple of ways that voluntary give backs could be implemented. 1. Have the give back be a gift. The problem with that is that they might have to pay taxes on income they would not have received. They would be taxed on income they did not accept. If they decided to do that they will place taxes on that 5% they gave back to the City. 2. Amend the retirement ordinance to contemplate the fact that even though their take home salary was reduced by 5% for retirement purposed that 5% was not included. This would require passage of an ordinance. The benefit of doing it that way is that the employee would not incur a tax liability and still not suffer on their retirement. 3. Give the employee the option of the first method or have the employee elect to reduce their income by 5% to be treated for all purposes, including retirement purposes as a 5% reduction. In this case, employees could decide to handle it one way or the other. This would be left up to the employee. 4. Department heads could take back their 5% pay reduction. A final decision has not been made. There is some sensitivity to this because it is very likely that within 2/3 weeks a law suit calling this whistle blower activity will be filed. Member Frybort asked Mr. Novak if these options were considered because of the potential lawsuit or have you considered that it is a ethics violation. Attorney Novak responded no. To be characterized as an ethics violation they would have to say that Mr. Kirk received a personal benefit which he has not received, because he is not vested in the retirement system for which such a sweetner would exist. Also, what he has implemented is a reduction in compensation, rather than an increase in compensation. Member Amen Hetep asked how long the 5% reduction is in effect. Attorney Novak answered, from March 2005 through the end of the fiscal year, which is June 30, 2006. Member Amen Hetep asked if retirement payments are based on the last two years of service. Attorney Roberts answered that they are based on the highest two years of earnings in the past 10 years of employment. Attorney Novak said that Mr. Kirk will not be eligible for retirement benefits unless he stays in the employment of the City of Lansing until 2012. At that time, if you calculate his final average compensation for the past 10 years and none of those years at a higher compensation than the period of time in which the pay reduction was given, then it could have an impact on him, but he would have to work until 2012 with no pay increases or compensation at levels higher than the 2005/2006 year.