Risky Bets Cost Detroit Pension Funds $480M

**3WC** · December-26-10, 11:44 AM

Your Detroit Free Press comes up with a great expose once again. I'm impressed. I don't know how to post the link to the article.

I'm very surprised nobody has already posted a link because it's an important Detroit story. Why does it take a guy in TX to start this thread? It should be of particular interest to all Detroit retirees on the forum.

Go to it folks.

**Ray1936** · December-26-10, 12:04 PM

http://www.freep.com/article/2010122...on-480-million

Aw, 3WC, get a buddy to show you how to copy and paste. It's EZ.

Buy American · December-26-10, 12:11 PM

Originally Posted by 3WC

Your Detroit Free Press comes up with a great expose once again. I'm impressed. I don't know how to post the link to the article.

I'm very surprised nobody has already posted a link because it's an important Detroit story. Why does it take a guy in TX to start this thread? It should be of particular interest to all Detroit retirees on the forum.

Go to it folks.

That was next on my list of things to do today 3WC...and yes, it is of GREAT interest to many of us on this forum. No one to oversee the pension fund just like no one to oversee what the Water Department does to screw the suburbs. Detroit and the people who lead [[some excluded) have brought the City to its' knees. thug KK and Conyers, Garcia and many others have used Detroit as their own personal ATM. There isn't much that one person can do to change things and I don't see much outrage from Detroit taxpayers either. Unexplainable!

**3WC** · December-26-10, 12:31 PM

Thanks, Ray. [[You assume I have a buddy that knows how to post links.) Anyway, I'm just about as old as you, but clearly less talented in the technology department.

**SWMAP** · December-26-10, 01:10 PM

"That was next on my list of things to do today 3WC...and yes, it is of GREAT interest to many of us on this forum. No one to oversee the pension fund just like no one to oversee what the Water Department does to screw the suburbs. Detroit and the people who lead [[some excluded) have brought the City to its' knees. thug KK and Conyers, Garcia and many others have used Detroit as their own personal ATM. There isn't much that one person can do to change things and I don't see much outrage from Detroit taxpayers either. Unexplainable!"
Please could someone who lives in the suburbs with a little family please post how much he or she paid last month or quarter for residential water bill? Then people from somewhere else [[Windsor; flint; Saginaw; las Vegas; Texas, etc.) so Buy American can see that he's not getting "screwed" on his water by corrupt Detroit.
I can't do it because I live in the City and live alone so not really comparable.

**Pickford-Bentler** · December-26-10, 01:29 PM

This quote from the article does not make sense.

[QUOTE]
The combined losses are staggering for public pensions already battered by the financial crisis of 2008. The most recent annual report shows the funds had combined assets of $5.44 billion in June 2009, down from nearly $7.4 billion in June 2008.

http://http://en.wikipedia.org/wiki/...raph_[[log).svg

In June of 2008, the DIJA was at or around 12,000. By June of 2009, the Dow was at around 8,500. That is roughly a loss of 30%

7.4 billion - 2.2 billion = 5.2 billion.

My point is that quite a few funds managed by so-called top flight professionals took quite a hit, if one uses June 2008 and June 2009 as the measuring points.

Maybe there is a typo in the article.

Buy American · December-26-10, 01:50 PM

Originally Posted by SWMAP

"That was next on my list of things to do today 3WC...and yes, it is of GREAT interest to many of us on this forum. No one to oversee the pension fund just like no one to oversee what the Water Department does to screw the suburbs. Detroit and the people who lead [[some excluded) have brought the City to its' knees. thug KK and Conyers, Garcia and many others have used Detroit as their own personal ATM. There isn't much that one person can do to change things and I don't see much outrage from Detroit taxpayers either. Unexplainable!"
Please could someone who lives in the suburbs with a little family please post how much he or she paid last month or quarter for residential water bill? Then people from somewhere else [[Windsor; flint; Saginaw; las Vegas; Texas, etc.) so Buy American can see that he's not getting "screwed" on his water by corrupt Detroit.
I can't do it because I live in the City and live alone so not really comparable.

I disagree with you SWAMP, we are getting gouged...2 people, average size ranch, average size lot, no sprinkler system, don't water grass every day, no pool, average usage, my water bill averages $40/mo for the year; some months higher, other months lower; it has doubled in the past 8 years. Some suburbs average $40/3 mos. Go figure.

**bobby wobby** · December-26-10, 02:05 PM

This is another reason the State must take over the Detroit Pension funds,while there is money left.

**Novine** · December-26-10, 04:00 PM

"My point is that quite a few funds managed by so-called top flight professionals took quite a hit, if one uses June 2008 and June 2009 as the measuring points."

This is a fair point. Lots of pension funds suffered losses in the same way that many with money in the market and retirement funds saw the same kinds of losses. The issue with the Detroit pension funds is that some of these bad investments raise questions of basic competency of the people managing the funds and outright criminality by those with connections to the pension funds. You have enough problems battling the crooks on Wall Street. Why compound your problems by allowing crooks to invest your money and manage your funds?

**kraig** · December-26-10, 05:10 PM

Originally Posted by bobby wobby

This is another reason the State must take over the Detroit Pension funds,while there is money left.

How do you know the State will do better with the Pension Funds? Which Pension Fund is doing better, the City's or the State's?

**jerrytimes** · December-26-10, 06:03 PM

Originally Posted by kraig

How do you know the State will do better with the Pension Funds? Which Pension Fund is doing better, the City's or the State's?

You don't, but obviously the City isn't doing a good job with it, so why leave it in their hands?

**kraig** · December-26-10, 06:23 PM

Originally Posted by jerrytimes

You don't, but obviously the City isn't doing a good job with it, so why leave it in their hands?

Because dumping a billion dollar system that is fixable isn't a good idea. Investigate what went wrong and how it can be fixed first. It appears that it's more of bad vetting and monitoring than anything else. Improve the oversight and improve the results.

Just handing it over to the state without vetting the state's process and results, just because, appears to be the same lazy way of doing things that is causing problems in the first place.

**marcwigle** · December-26-10, 07:12 PM

Originally Posted by kraig

Because dumping a billion dollar system that is fixable isn't a good idea. Investigate what went wrong and how it can be fixed first. It appears that it's more of bad vetting and monitoring than anything else. Improve the oversight and improve the results.

Just handing it over to the state without vetting the state's process and results, just because, appears to be the same lazy way of doing things that is causing problems in the first place.

Absolutely... taking the pension from one government body to another just means [[usually) that someone else gets a chance to screw it up. Find out WTF happened, learn from it and get it running properly. We get the same crap here in Canada... the less government gets their hands in, the better. I'd rather see each individual look after their own pension funds than have some unknown bureaucrat look after it... just asking for trouble IMHO.

**Packman41** · December-26-10, 07:16 PM

Originally Posted by Pickford-Bentler

This quote from the article does not make sense.

My point is that quite a few funds managed by so-called top flight professionals took quite a hit, if one uses June 2008 and June 2009 as the measuring points.

Maybe there is a typo in the article.

Let's not minimize this.

Re-read the article. The problem was NOT with the stock and bond portfolio that was run by professionals. The real problem is with the real estate and alternative investment section of the portfolio - that was NOT run by professionals. Instead the pension fund boards used the "family and friends" plan of "advisors" with NO credentials whatsoever.

The only credentials required was the ability to pay kickbacks, bribes and grant special favors to the pension fund trustees. MonCon, Derrick Miller and other criminals sold out their votes to these "advisors." Just another Kwame style shakedown in order to do business in his town.

The drop in values is NOT due to general market conditions. Rather, it is due to criminals looting the pension plans.

People need to go to jail over this.

**3WC** · December-26-10, 08:07 PM

Packman is correct. The Funds have a history of corruption and incredibly bad judgement.

Years ago a public company I was running borrowed just shy of $10 million from one of the Funds. It was secured by valuable real estate in FL. An advisor with whom we had a good relationship [[for a huge fee) took our loan application to the Fund and the loan was closed within a week. We repaid the loan with interest as agreed. The point is, the Board of the fund had no ability to do any due diligence and got repaid because it was lucky that the loan turned out to be prudent. Also, we paid the Fund a very large "commitment fee" [[not unusual except for the amount) and their lawyer, Zajac as I recall, still the power behind the Board I'm told, a huge legal fee, unusual based on the amount. It was a good deal for us because we couldn't get a loan elsewhere and we made a lot of money when we sold the real estate.

I eagerly await tomorrow's online Free Press. Per today's article, tomorrow's story will be about the Grand Park Centre $30 mil office building deal, about what I have quite a bit of information, if I can remember it. The building was originally the Michigan Mutual Building on Adams. [[Actually, there are two adjoining buildings.) Mutual Ins abandoned Detroit and because in it's view the buildings were essentially valueless, donated them to the School Board. The DPS couldn't use the buildings so eventually put them on the market. It's broker [[can't remember the name), solidly connected to the powers that be, arranged the sale to Cappazoli Advisors, out of CA as I recall. However, through a FOIA request by my lawyer, I obtained a the closing documents from DPS [[after almost having to file a lawsuit). The actual purchaser of the building was a newly created subsidiary of one of the Pension Funds used as a vehicle to acquire it. It paid $7 million and committed to renovate the building for for almost $23 million more.

That building was not worth a million bucks when it was sold to the Fund and after all the renovation can't be worth more than a million today.

I discussed this deal at the time with many of my real estate friends. We were appalled. The transaction was so transparently fraudulent that it is inconceivable that it was not investigated thoroughly and someone didn't go to jail. [[We discussed at the time if the whole deal was a scam in an effort for the pension fund to make a cash infusion to the DPS - sort of a social conscience type of "investment." But, why pay $23 million more to renovate the place, all for the benefit of Cappazoli.)

By the way, both Funds have made significant investments in the Book Cadillac deal, money many if not most people think will never be repaid.

Ray1936, I recall you're a retired Detroit police officer; how do you feel about all this?

The Free Press reporter appears to be a diligent and experienced investigative reporter and I can hardly wait to see her article tomorrow.

**Zacha341** · December-26-10, 09:03 PM

You dig! Good point...

Originally Posted by kraig

How do you know the State will do better with the Pension Funds? Which Pension Fund is doing better, the City's or the State's?

**Zacha341** · December-26-10, 09:05 PM

Exactly.....

Originally Posted by kraig

....Just handing it over to the state without vetting the state's process and results, just because, appears to be the same lazy way of doing things that is causing problems in the first place.

**Packman41** · December-26-10, 09:20 PM

Originally Posted by 3WC

....It's broker [[can't remember the name), solidly connected to the powers that be, arranged the sale to Cappazoli Advisors, out of CA as I recall. However, through a FOIA request by my lawyer, I obtained a the closing documents from DPS [[after almost having to file a lawsuit). The actual purchaser of the building was a newly created subsidiary of one of the Pension Funds used as a vehicle to acquire it. It paid $7 million and committed to renovate the building for for almost $23 million more.

That building was not worth a million bucks when it was sold to the Fund and after all the renovation can't be worth more than a million today.

Capozzoli and the CAP Fund are out of Northville, MI and have been discussed here in the past:
http://www.detroityes.com/mb/showthread.php?t=978

I seem to recall that CAP took MonCon on a shopping trip in order to sway her vote on a pension investment.

In Detroit bribery stands for "solidily connected."

**Al Publican** · December-27-10, 12:38 AM

...I've served my time in Hell, Michigan." [[My play on an old Marine Corps take.)
For years I've been saying that the Police Fire Pension Fund was a rare bright spot in Detroit, much brighter than, say, San Diego's pension system that as of last year was around $140M in the red.

Unlike San Diego, Detroit has two pension systems, "general city employees" and "police fire" that are separate entities.

**rid0617** · December-27-10, 04:26 AM

Originally Posted by 3WC

Thanks, Ray. [[You assume I have a buddy that knows how to post links.) Anyway, I'm just about as old as you, but clearly less talented in the technology department.

Don't feel alone. This old man is still analog in the digital generation

**Left_For_Texas** · December-27-10, 06:29 AM

Originally Posted by SWMAP

"Please could someone who lives in the suburbs with a little family please post how much he or she paid last month or quarter for residential water bill? Then people from somewhere else [[Windsor; flint; Saginaw; las Vegas; Texas, etc.) so Buy American can see that he's not getting "screwed" on his water by corrupt Detroit.
I can't do it because I live in the City and live alone so not really comparable.

It doesn't seem to me that Detroit's water and sewer rates are too high. I pay on average about $150 per month [[ in South-Central Texas). Of course, I have, to do some outdoor watering year round here to keep my yard and landscaping alive. In the summer it gets either side of 100F for a few months straight, so maybe it's not a fair comparison.

**daddeeo** · December-27-10, 07:08 AM

This pension fund fiasco is what happens when you "get government off our backs".
The lack of oversight is appalling. It's unfortunate but you just can't seem to trust anyone anymore.

**Whitehouse** · December-27-10, 12:58 PM

Who audits these morons!!
http://www.freep.com/article/2010122...llion-building

[[And before the text is pulled from the website, I posted it here)

Detroit's police and fire retirement fund has spent at least $30 million to renovate an office building overlooking Grand Circus Park that's now worth just more than $1 million, pension and city assessor's office records show.
A pension adviser managing the building at 28 W. Adams says it plans to sink another $1.4 million into the property next year.

Steve Morris, assistant professor of real estate finance at the University of Michigan's Ross School of Business, says the deal doesn't add up.

"I can't fathom how they could have spent that amount of money," Morris said. For what the pension fund paid, per square foot, to renovate the 1921 building, it could have built a "luxury marble high-rise with the latest technology."

The pension fund bought the building as an investment property, but operates its own offices out of City Hall. The investment is among a slew of deals that have led Detroit's two public pensions to report losses of more than $480 million since 2008.

Emery Matthews, chief investment officer for MayfieldGentry Realty Advisors, which the police and fire fund hired to manage the property in 2003, defended the renovations, saying it is "basically a brand-new building with historic character."

Grand Park Centre.

It's nice to know that this building is in an immaculate shape but is the sensible business? $30 million dollars could have reconstructed the Fine Arts building I gather.

**gumby** · December-27-10, 01:43 PM

Originally Posted by SWMAP

Please could someone who lives in the suburbs with a little family please post how much he or she paid last month or quarter for residential water bill? Then people from somewhere else [[Windsor; flint; Saginaw; las Vegas; Texas, etc.) so Buy American can see that he's not getting "screwed" on his water by corrupt Detroit.
I can't do it because I live in the City and live alone so not really comparable.

I live in Flint alone in a 1600 sq ft house on a 50x100 lot without a need to water my lawn in Flint and pay between $35 and $45 per month on my water bill with another unwarrented rate hike coming from the city of Detroit in the next month or so. I can almost guarantee that no one is paying 40 bucks for 3 months. That is why I am glad Genesee County and a few surrounding counties are building our own pipeline and removing ourselves from Detroit's grasp.

**jt1** · December-27-10, 02:41 PM

Originally Posted by gumby

I live in Flint alone in a 1600 sq ft house on a 50x100 lot without a need to water my lawn in Flint and pay between $35 and $45 per month on my water bill with another unwarrented rate hike coming from the city of Detroit in the next month or so. I can almost guarantee that no one is paying 40 bucks for 3 months. That is why I am glad Genesee County and a few surrounding counties are building our own pipeline and removing ourselves from Detroit's grasp.

Can you also list:

1. Of that $35-$40, how much is charged by your lcoal municipality
2. What your gas and electric bills are [[since nobody ever complains about DTE, MichCon, etc even though they are dropping millions and millions in advertising, sponsorship, dividends paid to shareholders [[currently at amost 5% of share price)
3. What brought you to the conslusion that your increase is unwarranted
4. Be sure to check in when you start getting bills from your future water provider. From the tone of your post I would assume that you are expecting a significant discount.