Directors loyal to the Patrick administration are pitted against union representatives on the secretive MBTA retirement board in a new conflict over an old question: whether state law compels them to reveal information about the management of the $1.6 billion pension fund.
In this latest episode, the three board members aligned with Governor Deval Patrick favor making records public, and the three union representatives do not.
The six-member board has long guarded the fund’s status as a private trust, despite millions of dollars in taxpayer backing. They have rebuffed legal and political pressure over two decades to adopt the same ethical and disclosure rules that apply to other pension funds for public workers.
But recently — in the wake of a law passed last summer requiring the MBTA pension fund to be subject to public records law — the board split, three to three, on whether to withhold records about the fund.
Three directors backed by T management and Patrick voted to release information sought by the Globe and others, according to officials from the T and the state Department of Transportation. But three other members representing the Boston Carmen’s Union Local 589 effectively blocked the disclosure.
That sent the tie-breaking decision to an “honorary member” — attorney Katherine Hesse — and she voted against disclosure, according to representatives for the T and transportation department.
The union members then voted to seek a “judicial determination” on whether they are required to follow the law passed last summer.
‘Most public pension funds . . . abide by strict ethics rules and it’s about time ours did, too.’ — Pam Wilmot
The union members did not respond to repeated requests for comment. In the past they have said that public disclosure does not benefit their members.
State Senator William Brownsberger, a Belmont Democrat who cochairs the Legislature’s Joint Committee on Public Service, will hold an oversight hearing Feb. 25 on the MBTA’s investment loss and its failure to follow the disclosure law. Brownsberger was one of the authors of that measure.
“Most public pension funds across the country abide by strict ethics rules and it’s about time ours did, too,’’ said Pam Wilmot, executive director of Common Cause Massachusetts, a group that advocates for government reform. “Here you have an agency managing public employee retirement funds, with public funds. They should abide by the same rules in order to protect the integrity of the fund and confidence in their independence.”
The records sought by the Globe involve a controversial $25 million investment that became worthless in a suspected Ponzi scheme. The investment was recommended to the board by its former executive director, Karl White, who had joined a New York hedge fund months earlier.
Under typical state ethics rules, White would have been barred from pitching his former colleagues on an investment in his new firm for at least a year.
The Fletcher Asset Management hedge fund that White sold to the pension fund is now bankrupt. Federal authorities and the Massachusetts attorney general are investigating. But the pension fund had disclosed none of the saga to its members or the public, merely omitting the 2007 Fletcher fund from its listed investments in a 2011 annual report.
Ever since the problem came to light, no officials or directors of the pension fund have been willing to be interviewed. A spokesman for the fund, Steve Crawford, has said officials are cooperating with authorities to try to recoup the lost money.
But when the Globe asked for records after the Fletcher loss — information that would be public at other state or municipal pension funds — the MBTA fund refused to release them.
The governor, attorney general, and transportation officials urged the retirement fund to open its records. Administration officials rarely comment on the T retirement board’s actions. But in a sign of the growing fissure between the two sides, MassDOT spokeswoman Cyndi Roy-Gonzalez said, “The management appointees support the law that was passed by the Legislature last year.’’
Board members on both sides did not return calls or declined to comment. Those who voted not to release records are relying on a 1993 ruling by the state’s highest court that said the fund, as a private trust, is not subject to state oversight.
The retirement board’s lawyer, Carl Valvo, said union representatives are not convinced the new law supersedes the 1993 case, in which the Globe was also seeking records.
In the meantime, Brownsberger said he was heartened to hear that three members of the T’s pension board had voted “to do the right thing.”
Those three include the chairwoman, union organizer Janice Loux; Darnell Williams, chief executive of the Urban League of Eastern Massachusetts; and Jonathan Davis, the T’s deputy general manager and chief financial officer.
Directors representing the union members are Carmen’s union officials James O’Brien and James Evers, as well as James O’Connell, originally elected to represent the non-Local 589 workers.