Tim Reid and Jim Christie, Reuters
Posted: 12/16/2012 03:31:33 PM PST
Special Section: San Bernardino
A high-stakes legal battle has intensified as the largest U.S. pension fund filed court papers denouncing the financially troubled city of San Bernardino for what it called a “sham” bankruptcy and accused the city of “criminal behavior” in withholding payments to the pension plan.
The filing on Friday by the California Public Employees’ Retirement System, or CalPERS, came 10 days after San Bernardino officials traveled to Sacramento to plead with top CalPERS executives for more time to make payments.
At issue is whether the pensions of government workers take precedence over other payments in a municipal bankruptcy – which could have ramifications for municipal creditors, including Wall Street bondholders, as more cities and towns have trouble meeting their obligations.
No agreement was reached at the CalPERS-San Bernardino meeting, and CalPERS officials told Reuters they have little latitude to allow San Bernardino – or any other city that pays into its pension fund – to alter the payment schedule.
San Bernardino officials, for their part, say they also have no alternative – and sorely wish they did.
“Why would anyone put themselves through this level of pain – daily, recurring pain – to perpetrate a sham?” asked City Attorney James F. Penman. “You couldn’t do that and be in good control of your mental faculties.”
Penman said he hadn’t yet seen CalPERS’ most recent filing, but the bankruptcy is filling the minds of city officials.
“For CalPERS, it may be just another issue – we’re one of hundreds of cities they have – but for us, every day that we go into work, every night that we’re sitting at home thinking…there’s an umbrella of sadness over us,” he said, noting he met to discuss the bankruptcy Saturday with two City Council members and planned to meet Sunday night with Mayor Pat Morris. “These decisions are made after a lot of thought and usually a lot of dialogue, and for some of us a lot of prayer.”
In a closely related action, bond insurers who are responsible for the debt of Stockton filed papers in that city’s bankruptcy case denouncing CalPERS’ efforts to be treated differently from other creditors. Stockton has continued to make payments to CalPERS while halting payments to some bondholders.
Both cities filed for bankruptcy in the wake of the housing market bust and years of financial mismanagement, and the two comparatively rare municipal bankruptcy cases are expected to set important precedents as to who gets paid when a government goes broke.
But while Stockton was well prepared when it filed for bankruptcy protection in June, San Bernardino’s finances and government operations are in deep disarray as political factions battle one another, according to an ongoing Reuters investigation. The city filed for bankruptcy on Aug. 1 with no plans as to how it would meet its obligations.
To read entire story, click here.
According to the article, “Both sides have told Reuters they are willing to fight this issue all the way to the U.S. Supreme Court.”
Translation: “both sides” will have attorneys churning out fees at a staggering rate.
As stated in a prior comment relating to this matter several weeks ago, attorneys will win, & everybody else will lose.
Larson better get himself in on all that free money goin round.
Anonymous #2:
Perhaps Mr. Larson should look into defending the City of Stockton.
According to the article, an entity with “$241 billion in assets” seems to feel that the law should not apply to them, and wants “to be treated differently” from others, and not have to follow the same rules as other city creditors.
Mr. Larson has recent experience defending clients against a similar level of arrogance.
HA HA HA, that’s an oxymoron, Larson defending arrogant individuals against arrogant individuals. That’s the same as Larson defending the devil against demons.
Anonymous #4:
I thought that an “Oxymoron” was a figure of speech with contradictory terms. Can you explain how my statement is an oxymoron?
And just as soon as I complement Little Stevie Wonder for not using “Devilreaux” in a comment, here you come using the phrase “devil against demons.”
If you are interested in adding a slight degree of credibility to your comments, you should avoid those types of analogies.
I couldn’t help but to use the most obvious example of demons and devils to illustrate the corrupt nature of the accused.
You are right,calling an elected official who makes a half of 1% a year of what the accused makes and is protecting the public welfare, arrogant, while defending the accused who has been in the practice of removing and manipulating political figures who have opposed him is not contradictory, it in itself is arrogant and misleading.
Red A: You must be referring to Mikey Ramos. Only Mike Ramos has “been in the practice of removing and manipulating political figures who have opposed him.”
If federal bankruptcy law can trump the laws of any state regarding the relationships and debts between the sovereign state and its non-sovereign administrative entities, what’s to stop a city from taking money from the state to build a bridge and reneging on that deal?? Or entering into a contract with a state agency to police it geography and then failing to pay the state?? Or the state lending the city money to do sometime under the terms of state law and then the city spending the money on something else and then telling the state to f*&^ off by filing bankruptcy and hiding under the shield of the federal government??
If the City of San Bernardino is able to use federal bankruptcy law to break state law regarding CalPERS, then this will be a very slippery slope. All of you public employee pension and public employee union busters should be very scared of what this precedence could to the operations of state and local government in America.
Congress should have NEVER expanded the bankruptcy laws to cover government entities like counties, cities, schools, special districts, etc.
Anonymous #6:
I’m not going to say that Mike Ramos has never taken steps that could be construed as “protecting the public welfare,” but his prosecution of Jeff Burum does not qualify. Neither did the prosecution of Neil Derry. In my opinion, both were motivated by retaliation and revenge.
Hey, did you see that a judge in Texas reduced the bail of the Dallas Cowboy player who is accused of intoxication manslaughter. He agreed that $500,000 was excessive, and reduced it to $100,000. If $500,000 is excessive for driving under the influence and killing somebody, I wonder what this judge would have thought about the $10 Million bail that Mike Ramos set for Jeff Burum