Zurik: Councilman, treasurer slam MERS chief's spending

Published: May. 12, 2015 at 5:10 PM CDT|Updated: May. 13, 2015 at 2:05 AM CDT
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Covington Councilman Mark Wright
Covington Councilman Mark Wright

COVINGTON, LA (WVUE) - A local councilman calls for the head of a state retirement board to resign. That follows a series of FOX 8 investigations that showed the head of that board may have used public money to pay for personal trips to the Gulf Coast.

"It shows a tone deafness," says Covington Councilman Mark Wright. "It shows an ignorance to the public."

Easter weekend, 2011 and 2012, the director of the Municipal Employees Retirement System, Bob Rust, stayed at the Grand Hotel in Point Clear, Alabama. He paid for the trip with public funds; he said he went to plan a conference.

"I have sincere doubts that he was planning for an education conference," Wright says. "That's spring break weekend."

Trips like that have this councilman, whose city employees are clients of MERS, calling for Rust to resign.

"We're talking about a retirement fund for people who have no other choice," Wright says. "Those people probably couldn't afford to spend a night, much less a weekend, at the Grand or Sandestin. So at what point do we justify… How can you justify those costs to those people? You really can't."

MERS funds pensions for local municipalities across the state, including the cities of Covington, Mandeville, Slidell, Hammond, Thibodaux and Gretna.

"I don't know whether to laugh or cry, be disappointed or pissed off, or all of the above," says La. Treasurer John Kennedy.

Kennedy, who has a seat on the MERS board, says what Rust has done is indefensible.

In 2014, Rust took a trip on Memorial Day weekend. And in 2011, he took two Gulf Coast conference planning trips, a few months apart.

"I know how it looks," Kennedy says. "It looks like he was just having a good time on public funds, on taxpayer dollars, on retirees' dollars."

We have new information in our "Swiped" investigation: more questionable credit card charges by Rust, including a weekend trip to the Grand Hotel in May 2013.

Rust rented a car from Friday to Monday, and stayed at the Marriott. That trip cost $1,662.64. The reason for it? "Conference planning."

Saturday afternoon, at 1:41, Rust and an unknown guest shared a Caesar salad and a large pizza at a Fairhope, Alabama restaurant. They also ordered a $45 bottle of Chardonnay and had two more quarts of wine - an afternoon of drinking in Fairhope, while Rust was supposed to be planning a conference.

In 2011, Rust took a trip to Memphis. His records show it was for Memphis in May, an annual festival. That trip cost $1,232.25 – and nothing in the records shows why the head of a retirement system would need to travel to a Memphis festival.

In 2013, Rust charged his public credit card a $25 Delta fee for his wife, one of a handful of times he did so. And in New York, he charged a $16 movie to his public card.

"I know Bob, and Bob is the director," Kennedy tells us. "He's well paid. And frankly, he should know better, he ought to know better. You don't need to know a law book from a Sears/Roebuck catalog to understand this is wrong, okay? I mean, this is just abusive."

Rust has declined an on-camera interview, but has responded in writing that MERS doesn't hold any public funds - so he says he's done nothing wrong.

"I saw your report and they're trying to slice and dice the words, and say it's not public funds because it can't be appropriated," Kennedy says. "Clearly it's public funds. It's public money, okay? It is public money."

But MERS' problems run deeper than this credit card spending.

In 2008, the system invested $40 million in a hedge fund, Fletcher Asset Management. The fund went belly-up.

"The hedge fund guy comes in and says, 'I've got a deal that you can't lose money on,'" Kennedy recalls. "That should have sent all of the board members running for the exit, okay? And then they couldn't get their money back… We are in litigation with the hedge fund. I don't know if we'll ever get the money back."

Kennedy says, overall, this retirement system has an $80 million deficit. That's one reason why he's outraged about the lavish annual education conference in Alabama that, last year, cost $62,000.

"There's no excuse for this, none whatsoever," Kennedy insists. "They shouldn't have been at Grand Hotel unless it was on their nickel. They didn't need to go. This was wrong."

Kennedy has a seat on the MERS board, along with House Retirement Chairman Kevin Pearson. It's Pearson who called the legislative auditor and got that office to launch an investigation.

Kennedy says, if the audit shows wrongdoing, he may push for Rust to lose his job. "Certainly dismissal is one of the options," Kennedy says. "I believe in due process."

But a councilman in Covington says he's seen enough. Between the failed Fletcher investments, the conferences and the questionable spending, he thinks it's time for the MERS board to hold their executive director accountable and make a change.

"Is he prepared to go into our public works barn and tell those workers, or our utilities clerks, 'Yeah, that money, those spendings are justified?'" Wright wonders. "And I don't think he can."

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