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Sunday, April 21, 2024 | Back issues
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New Orleans Must Pay|Into Fireman’s Fund

NEW ORLEANS (CN) - The U.S. Supreme Court declined to intervene in the ongoing legal battle between the Mayor Mitch Landrieu and the city's firefighters pension system over more $17.5 million the fund says it's owed in past due contributions.

In New Orleans taxpayers pay for a pension system that is largely managed by current and retired firefighters. In recent years, however, the fund has not fared well with investments, and reportedly has just $85 million in assets and about $424 million in liabilities.

As the financial well-being of the New Orleans Fire Fighters Pension & Relief Fund worsened, Mayor Mitch Landrieu balked at making additional payments to the system unless he the city gets more seats on the fund's board.

In July 2012, trustees of the fund sued the city over missed contributions. The city responded with a motion alleging the trustees mismanaged the fund's assets, and then filed a lawsuit for injunctive relief to keep the trustees from using certain financial consultants.

Civil District Judge Robin Giarrusso decided against the city and ordered it to make its past due contributions to the pension system, but that didn't deter Landrieu, who then tried to get the Louisiana legislature to give the city control over the fund.

He bolstered his argument by pointing to a recent audit that he said showed the fund lost half its value between 2010 and 2013, including $15 million lost after a Cayman Island-based hedge fund it invested in went broke.

Landrieu's evidence ultimately failed to get the Legislature to act, however, and he sought relief from Louisiana's 4th Circuit Court of Appeal.

A divided three-judge panel of that court refused on Sept. 24 to relieve New Orleans of paying the millions the fund now claims it is owed.

The majority opinion by Judge Dennis Bagneris Sr. says that, because the fund owes no fiduciary responsibility to New Orleans, the city has no right to sue for control of it. The majority also held that payments must be made whether or not the fund's investments seem wise.

The 4th Circuit ruled the mayor and city council do not have a say in how the pension plan spends funds contributed by the city, and the city cannot recoup for losses to the fund on account of trustees' bad investments.

The city "does not fall within the category of persons to whom the Trustees owe any fiduciary duty," the panel ruled. By Louisiana statute, the fund owes fiduciary duty only to the beneficiaries of the plan.

In dissent Judge Joy Lobrano sided with Landrieu. According to Lobraino, the majority should have lent more weight to the fact that the city's financial director, Norman Foster, who sits as a member of the pension fund's board.

In Lobrano's view, Foster absolutely has a fiduciary duty to ensure the pension fund is well-managed, and, as one of the mayor's representatives on the board, a right to sue if he believes something has gone awry.

Bolstered by Lobrano's position, Landrieu decided to seek a write of certiorari from the U.S. Supreme Court while also returning to the bargaining table with the pension fund. That session ended Friday with the parties apparently agreeing to refinance the city's debts to the fund.

If that deal - which would spread the city's repayments to the fund over 30 years - holds up, Judge Giarrusso must consent before it can take effect.

The Supreme Court denied Landrieu certiorari without explanation, as is its custom, Monday.

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