Our View

Asking a forensic pension lawyer to look for improprieties in the bowels of Wall Street stock brokerages is like letting a coon dog loose in a forest.

He’s going to race all over the place, sniffing every inch of the trail, eventually track down that raccoon and tree it.

It will be just a matter of time — and, for the people who hired him, a lot of their money.

That pretty much sums up what Edward Seidle, the forensic pension investigator hired by the Longboat Key Firefighter Pension Board, appears to be angling for.

Pension-board members, beware. Seidle is working you. He sees an opportunity for a good, long hunt.
That’s the message that came through vividly in Seidle’s nine-page, single-spaced “Interim First Report” delivered to the pension board last week.

Seidle brought to light an old issue — one that the pension board’s attorney, Bob Sugarman, raised almost six years ago: whether an illegal conflict of interest existed between the pension fund’s money managers and its investment consultant-brokerage, Morgan Stanley.

Seidle, as Sugarman did, principally questioned $209,000 in undisclosed payments from the pension fund’s managers to Morgan Stanley. And Seidle further raised the question of whether such a payment had an adverse effect on the performance of the fund.

Unfortunately, Sugarman never resolved the matter satisfactorily. It faded away.

But now that the firefighter union members hold a majority of seats on the pension board, now that the firefighters’ pay and pension benefits are being threatened and now that the unfunded liabilities in the firefighter pension are an increasingly alarming burden on taxpayers, it appears the firefighters union is trying to shift public attention to an issue that is not the real issue.

It is looking for someone to blame for the size of the pension’s unfunded liabilities (more than $12 million). And Seidle appears to be just the dog to let loose in this hunt.

We’re not questioning Seidle’s credibility or skills. He’s doing what a lot of lawyers and consultants do — try to persuade his client to take the case to the limit.

Indeed, if you read Seidle’s report, it is peppered with phrases that can persuade its readers that he should be engaged to investigate deeper.

Here’s a sampling:
• “ … longstanding conflicts of interest … may have undermined … may have violated … ” (italics and bold added) …

• “ … payments might create a conflict…”

• “ … since consultant conflicts may result in losses to the pension … ”

• “Matters to be reviewed include whether the Morgan Stanley conflicts of interest may have had an impact on the fund’s investment performance.”

Who knows whether there is anything to Seidle’s suggestions. This first preliminary report didn’t offer persuasive evidence. It basically suggests: “You should hire me to do more investigating.”

But you can predict where more investigating will lead: lawsuits.

You can foresee Seidle devoting months to forcing Morgan Stanley and the pension fund’s managers to produce six-year-old documentation and records to piece together the whodunit.

And you can foresee where this ultimately goes: depositions, court motions to produce evidence, lawyers and more lawyers for both sides. And time and money — month after month of legal fees mounting.

Eventually, a year, two years later, the matter ends up in mediation or arbitration, with Morgan Stanley paying a fine to make the nuisance go away.

Seidle whetted the situation with a guess that this conflict of interest could have cost the pension fund as much as $13 million in underperformance, effectively accounting for all of the pension fund’s unfunded liability. What a coincidence. But not likely.

This is not the trail down which the pension board or town should go.

What is abundantly clear here is, in hindsight, previous pension boards and their advisers were not as fully abreast of the management of the firefighters’ pension money as they should have been. But that’s not the main point. The main point is: Once again, Longboat Key taxpayers are reminded that the town is ill-equipped to be in the pension-fund management business, or for that matter, to be in the pension business at all.

Given that the firefighter union has a majority on the firefighters’ pension board, it won’t be surprising to see the board engage Seidle for additional investigating. Meantime, we hope that sideshow gives the Town Commission the urgency and courage to do what it must.

As the saying goes, when in a hole, the first step to getting out is to stop digging. In that vein, it is becoming clearer by the day the Town Commission must take dramatic action: Halt the town’s defined benefit pension plans, get out of the pension business and do what most private employers are doing — convert to defined contribution plans that are controlled by the employees.

There is a breathtaking consequence to this: The town’s taxpayers would be required to fully fund the $26 million in unfunded liabilities in all of the town’s pension plans through a bond issue. But this is not much different than what is to occur otherwise — taxes will be going up no matter what to cover the increasing pension deficits.

+ Jackson Lab: Don’t pay it
The giddiness last week in Sarasota over Bangor, Maine-based Jackson Laboratory selecting Sarasota County as the winner of its beauty contest was predictable.

Everyone likes to win and be loved.

So now we’ll soon see the lapel buttons popping up: “I Love Jackson Labs” or “Give Jackson All It Wants” or “Our Mice Will Be Better Than Orlando’s Mouse.”

Let’s hope rational thinking prevails — in spite of few signs of it so far.

Jackson Laboratory is seeking an extraordinary sum of money from state and Sarasota County taxpayers to build and operate a genetics research laboratory here. Estimates run as high as $200 million — $100 million from the state and $100 million from Sarasota County.

But that’s OK, the Jackson supporters say. Look at all of the economic benefits Jackson will produce!
These projections are staggering as well. Here’s one of the early ones in the wake of last week’s announcement: It “could generate 2,200 jobs and $600 million per year by 2030.”

Two points come most immediately to mind that Sarasota County taxpayers should consider as they and lawmakers are asked to approve $200 million of taxpayer money to be given to Jackson Laboratory:

1) What moral right do state lawmakers have to take your money and give an unearned benefit to Jackson Lab? What makes those lawmakers wiser than everyone else to determine how $100 million should be invested or spent?

2) There is an opportunity cost. To say Jackson Lab will create 2,200 jobs and $600 million per year is a guess. More important, the multiplier numbers ignore the opportunity cost — that is, the economic activity would otherwise occur if that $200 million is left in private hands. If you invest in one activity, you are not investing in another. Who is to say, then, that money would not produce equal or greater numbers of jobs and economic multipliers than Jackson Lab?

Don’t be cowed by the giddiness and the effusive economic projections.

WE RECOMMEND
If you haven’t voted yet on the two questions on the Longboat Key election ballot, here are our recommendations:

Beach-erosion bond issue:
The question is whether property owners should issue 20-year general obligation bonds not exceeding $16 million to fund erosion protection on the severely damaged north end of the Key and provide sand replenishment to certain “hot spots” on the Key?

Property owners in District A (all Gulf-front property owners and businesses) would pay 80% of the bond debt if both District A property owners and District B property owners (bayside residents) approve the measure. District B property owners would pay 20% of the cost.

If only District A voters approve, District A property owners would pay 100% of the cost.
We recommend: Vote yes (in both districts)

Commissioner terms:
The second question is whether the town charter shall be amended to provide that a partial term for any commissioner of more than one (1) year shall be counted as a term under the three consecutive term limitation provided for in the town charter?

We recommend: Vote yes

HIGH-SPEED RAIL: THE ROAD TO COLLECTIVISM
The following is an excerpt from national columnist George Will’s commentary last week in Newsweek on the Obama administration’s “fixation” with high-speed trains:

“So why is America’s ‘win the future’ administration so fixated on railroads, a technology that was the future two centuries ago?Because progressivism’s aim is the modification of (other people’s) behavior.

“Forever seeking Archimedean levers for prying the world in directions they prefer, progressives say they embrace high-speed rail for many reasons—to improve the climate, increase competitiveness, enhance national security, reduce congestion and rationalize land use. The length of the list of reasons, and the flimsiness of each, points to this conclusion: The real reason for progressives’ passion for trains is their goal of diminishing Americans’ individualism in order to make them more amenable to collectivism.

“To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they—unsupervised, untutored and unscripted—are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

“Time was, the progressive cry was ‘Workers of the world unite!’ or ‘Power to the people!’ Now it is less resonant: ‘All aboard!’”