SLED Ripped Off Its Own Retirees, Lawsuit Alleges

October 26, 2011

Investigative Reports

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The NerveThe S.C. Law Enforcement Division violated state law for years by taking higher-than-allowed pension deductions from the salaries of working retirees at the agency, a lawsuit pending before the state’s highest court contends.

Typically, public agencies contribute a percentage of employees’ wages toward their pensions, while the usually smaller employee’s share is deducted from their pay.

But a lawsuit filed by two former SLED agents claims that the state’s top investigative law enforcement agency deducted the higher employer portion from their salaries while they were in the agency’s working-retiree program, in violation of state law.

The five-member S.C. Supreme Court is scheduled Nov. 16 to hear oral arguments in the case of Phillip Grimsley Sr. and Roger Jowers v. SLED and the state of South Carolina. The justices are under no deadline to issue a ruling, according to court officials.

Columbia attorney Cam Lewis, one of the attorneys for the plaintiffs, told The Nerve last week that he knows of no other state agency that engaged in a similar practice with its working retirees.

“They went out and did their own system,” Lewis said about the SLED program.

{C}Contacted last week by The Nerve, SLED Chief Mark Keel, who was director of the state Department of Public Safety before he was nominated earlier this year by Gov. Nikki Haley to lead SLED, said his former longtime boss at SLED, Robert Stewart, did not violate state law.

That’s because the law requires that public agencies pay the state retirement system an employer contribution portion for each eligible employee, though SLED was not prohibited from reducing working retirees’ salaries by that amount, said Keel, an attorney.

“He (Stewart) was thinking it was cost-neutral to the agency and taxpayers,” Keel said, adding that the law previously did not require SLED to deduct the employee portion of the retirement contribution. “We retain experience, and it was basically no more cost to the agency.”

“The key word is ‘voluntary,’” Keel continued. “Nobody made them do it (participate in the working-retiree program). They could have left and found a job somewhere else.”

Generally, working retirees can receive their state pensions and salaries at the same time unless they are participating in the Teacher and Employee Retention Incentive (TERI) program, which defers their pension payments until they leave that program.

The two plaintiffs in the SLED case before the Supreme Court next month were not TERI employees, according to court records.

Keel said SLED no longer reduces working retirees’ salaries by the amount of the employer contribution – set this year at 11.13 percent for participants in the Police Officers Retirement System – though the employee portion – 6.5 percent – is deducted.

A 2004 SLED retirement form signed by one of the plaintiffs, which was included with court papers, indicated that the employer rate then was 13.6 percent, which, according to state retirement system records, included a 3.3 percent insurance surcharge. The form also noted that the 6.5 percent employee portion “will no longer be deducted from your check.”

Keel said Grimsley and Jowers, who filed a lawsuit against SLED in 2008, are no longer with the agency, noting that they were “special agents working vice.” He estimated that of the agency’s current 486-employee work force, which includes temporary workers, about 45 are working retirees.

Keel, who was a longtime SLED agent and supervisor before being nominated by former Gov. Mark Sanford in 2008 as the DPS director, said he didn’t know how many working retirees at SLED have participated in the agency’s working-retiree program since its inception about 10 years ago.

Lewis estimated the number of affected working retirees to be in the “dozens,” though he couldn’t provide a specific figure. The lawsuit seeks class-action status for the group.

The suit also seeks a court order requiring SLED to reimburse working retirees for the employer contribution deduction, along with interest; and banning the agency from making further such deductions.

Lewis told The Nerve he couldn’t estimate how much money is at stake in the suit.

Circuit Judge G. Thomas Cooper in 2009 dismissed the Richland County case, ruling that Grimsley and Jowers didn’t follow required administrative appeal procedures before filing the suit, court papers show.

The Nerve last week submitted written questions to the S.C. Attorney General’s Office, which is representing the state in the lawsuit, but did not receive a response by publication of this story.

In court papers, Emory Smith, an assistant deputy attorney general, said the state should be dismissed as a defendant because although SLED is a state agency, the agency’s working-retiree program is “not required by state statute.”

“This brief is not intended to address the validity of SLED’s program,” Smith wrote. “Instead, it addresses the failure of the appellants to exhaust administrative remedies and their failure, otherwise, to state a cause of action against the state and to have a basis upon which to proceed against the state.”

Ironically, SLED agents have been assigned over the years to the attorney general’s office.

The base employer-contribution rate in the state Police Officers Retirement System (PORS) has gradually risen over the years, from 10.3 percent in 2003 to 11.363 percent for next year, according to information provided by the S.C. Budget and Control Board, which oversees the state retirement system.

The 6.5 percent employee contribution rate for police officers has been in effect since 1988, said BCB spokeswoman Lindsey Kremlick.

Keel told The Nerve that working retirees at his agency previously could participate in the retirement program for four years while maintaining their rank. If they wanted to continue working at SLED after the four-year program ended, they had to relinquish their rank and accept a lower salary, he said.

The state retirement system is made up of five separate divisions – general state and local government employees, police officers and other public safety workers, solicitors and judges, National Guard personnel, and state lawmakers. The Nerve previously has reported that legislators have been particularly generous with their own retirement benefits over the years.

State working retirees lost a major case earlier this year before the S.C. Supreme Court. In that case, a group of working retirees rehired before July 1, 2005, including police officers and general state employees, contended that the state broke a contract with them by deducting employee retirement contributions from their paychecks.

Lewis, one of the attorneys for the plaintiffs, told The Nerve earlier that the state likely would owe more than $10 million to that group, which, according to state records, numbered more than 5,000, if the Supreme Court ruled in their favor. The justices, however, in a 4-1 vote in May ruled against the plaintiffs.

In a related case, the high court in 2006 ordered refunds, which totaled nearly $38 million, to about 14,000 retirees who participated in the TERI program.

Reach Brundrett at (803) 254-4411 or rick@thenerve.org.