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State Senator Mark Montigny presses MBTA on pensions

In a letter to colleagues, state Senator Mark Montigny (seen here in 2011) called the $1.6 billion retirement system outdated and said it needed greater oversight going forward. Suzanne Kreiter/Globe Staff File/2011

State Senator Mark Montigny urged fellow lawmakers Monday to address “potential mismanagement” and a lack of clear financial reporting at the MBTA pension fund, as part of their broader effort to overhaul the transit system.

In a letter to his Senate colleagues, Montigny, a Democrat from New Bedford and an assistant majority leader, called the $1.6 billion retirement system outdated. He said it needed a historic audit and greater oversight going forward.

“In the spirit of good governance, we must work to dismantle the notion that a publicly subsidized pension fund can operate in the shadows under the guise of a private entity,’’ Montigny wrote.


His comments came after a Globe report Sunday that well-known Wall Street whistle-blower Harry Markopolos had taken the findings of a six-month study of the T pension fund to federal and state authorities last week. His report alleges there is as much as $470 million in overstated assets and understated liabilities at the fund.

A spokesman for the T pension fund, Steve Crawford, has denied the assertions in a statement, saying management is “confident that an independent review of its investment return reporting, and asset and liability calculations, will validate its policies and practices, and the work of its audit and actuarial professionals.”

He also said the fund’s management would cooperate with “any third party designated by the board” to examine the fund’s stewardship on behalf of 12,000 active and retired employees.

Markopolos, a Whitman-based financial analyst, and his coauthor on the 103-page report, Boston University finance professor Mark Williams, brought their findings Friday to a meeting with officials from the Securities and Exchange Commission, the US attorney’s office, the FBI, and the state Office of the Inspector General.

The authors, along with a team of researchers and forensic accountants, analyzed the T pension fund’s annual reports from 2009 through 2013. The fund reports lack detail in a number of areas, making it difficult to fully evaluate the investments and accounting methods. The fund’s audit firm, KPMG, has provided only qualified endorsements of the annual reports in recent years, citing the omission of standard information.


Based on the publicly available information, Markopolos questioned the accuracy of the pension fund’s reported investment returns. The analysis also asserts that the T pension fund overestimated its assets by changing accounting approaches three times in as many years, and that it is undercounting obligations by using old mortality tables to project future payments to retirees.

“If the retirement plan is solvent and doing well — and I certainly hope it is — they should let the public know,’’ said state Representative Shaunna L. O’Connell, a Republican from Taunton who five times filed measures to require the retirement system to behave like other pensions for public workers — with open meetings, public availability of its board minutes, and full disclosure of its finances.

The measures have never passed. “It’s a great disservice to the retirees not to know whether their pension fund is healthy,’’ O’Connell said in an interview.

She said lawmakers have known for years that, “there’s a secret pension system at the MBTA,’’ yet no legislation has been passed to change its status as a private trust to one that must follow the disclosure and ethics rules that apply to other pensions for public workers.

“There’s really no reason we can’t fix it, except that there’s no will here on Beacon Hill,’’ O’Connell said.


The Globe is suing the pension fund for records on a $25 million hedge fund loss that the pension failed to disclose on a timely basis.

Montigny, the state senator, expressed frustration that the Legislature has not been able to require the T pension fund to be more open. “It’s outrageous, the fact that it’s considered a private trust,’’ Montigny said.

He said the fund must submit to a full audit of its finances and become more transparent.

“If you don’t like it,’’ Montigny said of the T pension fund, “we’ll put you out of business.”

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