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Judge calls for open MBTA pension files

A Suffolk Superior Court judge ruled Wednesday that the records of the MBTA pension fund should be open to the public because the system receives tens of millions of dollars in taxpayer funding from the transit authority each year.

The decision by Judge Kenneth W. Salinger concluded that “the Board does indeed receive public funds from the
MBTA, and thus that the Board’s records are now subject to mandatory disclosure under the public records law.”

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The ruling could end decades of secrecy by the $1.6 billion retirement system for transportation workers, which has shielded its records because it says it is a private trust. Less than two hours after the ruling was issued, the pension fund released a detailed consultants’ report defending the accuracy of its financial reports from 2011 through 2013.

A statement on the pension board’s website said the consultant’s report “validates the fund’s reporting and results” and refuted a critical analysis by Wall Street whistleblower Harry Markopolos last June that alleged the fund was overstating its financial health.

A spokesman for the T’s pension plan, Steve Crawford, declined to comment on the court ruling about making the system’s records public.

The judge said a 2013 amendment to the state’s public records law by the Legislature applies to the T pension fund. Under that rule, any entity that receives or spends public money for the payment of pensions to employees of the state or a “political subdivision” such as the MBTA must comply, Salinger said.

The ruling comes more than two years after the Globe in December 2013 unsuccessfully sought meeting minutes related to a $25 million hedge fund loss that the pension fund did not disclose.

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The newspaper sued the MBTA pension fund for the minutes and other documents after the state’s supervisor of public records said the 2013 amendment did not apply to the T retirement fund.

The Massachusetts Bay Transportation Authority is a large source of funding for the pension plan, contributing nearly $253 million between 2009 and 2013 alone. The sums continue to grow as investments can fall short of payouts promised to 12,000 current and former transit workers.

Next year, the authority plans to contribute $84 million, an $8 million increase from earlier estimates.

The judge found that there is a “strong public interest” in obtaining information about the fund, “because any funding shortfall could lead to pressure to increase the public funding of the plan,’’ even if there is no contractual obligation to do so.

State Senator Mark Montigny, a Democrat from New Bedford who has supported making the pension fund’s records open, welcomed the court’s decision.

“The fact that we have to argue with the fund is the sign of a much bigger problem,’’ he said. As a pension fund subsidized by taxpayers, he said, “everything should be public.”

The pension fund’s lawyer, Carl Valvo, had argued that the pension’s assets, once they leave the hands of the transit authority, become private.

“The board insists that even though these monies are public funds when they are paid out by the MBTA, they are no longer public funds one blink of the eye later when they are received by the fund,’’ the judge said in his decision. He rejected that argument, saying, “This makes no sense.”

Valvo and pension fund officials have long believed that a Supreme Judicial Court ruling in 1993 had settled the matter of the pension fund being private. But the judge in the new case said the 2013 amendment was clear.

That amendment was nearly overturned by the Legislature in 2014, when lawmakers were persuaded by the pension fund and the state’s supervisor of records that it could not supercede the 1993 SJC ruling. But then-Governor Deval Patrick vetoed that effort, and the expanded public records language remained law.

Judge Salinger’s decision marked the fourth time in three years that the Globe has successfully sued to obtain records that the secretary of state’s office claimed did not need to be released.

The state comptroller has been awaiting the release of the pension fund’s consulting report in order to complete the Commonwealth’s 2015 financial statements. The pension board hired FTI Consulting to do the review after Markopolos, who identified the Bernard Madoff fraud, and Boston University professor Mark Williams called into question the fund’s accounting and investment reporting practices. They estimated that the pension fund could be misstating its assets and liabilities by as much as $470 million.

The T’s consulting report found that the pension fund’s financial reports from 2011 to 2013 were accurate, and further confirmed aspects of its reporting in 2010 and 2014.

The report did find what it called “insignificant” differences in some numbers, such as overstating international equity performance by 1.5 percentage points in 2013.

James O’Brien, president of the Boston Carmen’s Union, Local 589, and a member of the pension board, said in a statement, “There were serious allegations previously made about the integrity of the fund, which were unsupported and unsubstantiated.” He said the retirement funds “are in good hands.”

Markopolos and Williams said the T’s consulting report was narrow in scope and left questions unanswered.

The pension board last month made two changes in response to issues raised in the Markopolos-Williams report: adopting newer mortality tables and lowering the annual expected investment return to 7.75 percent from 8 percent. Those changes increased the fund’s unfunded liability by $53 million.

Markopolos said the report also did not dig deeply enough into $716 million in alternative investments like private equity and hedge funds.

“This is their most underperforming asset class, with the least amount of transparency,” Markopolos said.

Montigny, the state senator, said the T’s consulting report would not have been necessary “if there’s nothing to hide.”

The judge is planning to hold a status conference, at which the T could raise additional “constitutional” claims in the records case. The pension fund also could appeal the decision.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.
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