Cops file suit over
pension fund ‘raid’

The police union joins 2 veterans
in alleging the state improperly
diverted $347 million

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By Rick Daysog
rdaysog@starbulletin.com

Backed by the state police union, a retired Maui police captain and a Honolulu police officer have filed a class-action lawsuit against the state of Hawaii, alleging that the state "skimmed" $346.9 million from the state retirement system.

In a 12-page complaint filed yesterday in state Circuit Court, retired Maui police Capt. George Kaho'ohanohano, Honolulu police Detective Loren Andrade and the State of Hawaii Organization of Police Officers said the state violated the state Constitution by diverting excess income earned by the state Employees' Retirement System.

"Through a variety of legislative contrivances, the state has raided, skimmed and otherwise diverted funds from the ERS for its own benefit and that of its political subdivisions," said Peter Gruenstein, who, along with local attorney Mark Davis, are representing the officers and SHOPO.

"This seeks to set up a large no-trespassing sign on the ERS."

The suit, which was filed on behalf of 93,000 state and county workers and retirees, is asking that a 1999 law be declared unconstitutional and seeks damages of $346.9 million, plus lost earnings.

That law transfers the ERS's investment income in excess of 10 percent to state coffers.

The suit also seeks to enjoin the state from taking further actions that would "impair or diminish" the $8 billion ERS.

State Attorney General Earl Anzai could not be reached for comment yesterday. But state Sen. Colleen Hanabusa (D, Waianae) said she was perplexed by the lawsuit since state lawmakers, not the ERS or federal pension officials, set the level of funding for the retirement system.

Hanabusa said the retirement fund is not in financial danger, and there is no threat of reduced benefits for retirees and state workers as a result of the 1999 law.

"We determine how much people will be paid, we determine whether people have collective bargaining rights, we determine the whole gamut," Hanabusa said.

Gruenstein, an Alaska-based attorney who specializes in pension fund litigation, noted that the ERS's unfunded accrued liabilities (benefits owed but not funded) have grown to about $991 million from $543 million largely as a result of the 1999 law.

He said the law also has deprived the ERS of a sufficient level of funding that would allow employee pension contributions to be terminated or decreased.

"It's not far-fetched to believe that in five, 10 or 15 years, the system will be in jeopardy," he said.

"It would be naive to believe that state of Hawaii could, year after year, raid this fund and use the assets of the fund without ultimately jeopardizing its integrity."

The suit was filed a day after the state Senate Labor Committee approved a resolution calling for Legislative Auditor Marion Higa to investigate the investment decisions of the ERS.

SHOPO President Tenari Ma'afala said that police officers, who pay 12.2 percent of their monthly salaries into the pension fund, believe it is wrong for the state to "raid the ERS and use its assets for the state's benefit."

"It's my money and it's my retirement," added plaintiff Kaho'ohanohano, who retired from the Maui Police Department in 1999 after more than 28 years on the police force.

"Why is somebody else making use of it?"