MyGovCost News & Blog

Crime Still Pays for Corrupt Government Pension Boss

Thursday June 2nd, 2016   •   Posted by K. Lloyd Billingsley at 3:22pm PDT   •  

bribe_MLFrom 2002 to 2008 Fred Buenrostro, a former deputy director of the state Department of Personnel Administration, was the chief executive of the California Public Employees Retirement System (CalPERS), the nation’s largest pension fund. In 2008 CalPERS paid Buenrostro an annual salary of $238,992, but that wasn’t enough for the government pension boss. As Dale Kasler notes in the Sacramento Bee, Buenrostro took more than $250,000 in bribes from former CalPERS board member Alfred Villalobos, a former deputy mayor of Los Angeles. The money was intended “to steer pension fund investments to the private equity firms he represented.”

Villalobos bagged $50 million helping those clients win investments from CalPERS. The investments proved “mostly profitable” for CalPERS, as Kasler reported, but CalPERS conducted an investigation and “concluded that it probably spent tens of millions of dollars in larger-than-necessary investment management fees because its bargaining power was undermined by Buenrostro’s actions.”

Villalobos killed himself last year, and on May 31, 2016, Buenrostro was sentenced to four and a half years in prison. A securities lawyer told reporters “this closes a dark chapter in the history of an institution that stood tallest when it mattered most.” Not so fast, Counselor. As Mr. Kasler reported on June 2, Buenrostro is “continuing to get pension payments from the very agency victimized by his crime.” His pension in 2008 was $16,800 a month and has now been reduced to a paltry $11,769 a month. CalPERS overpaid Buenrostro $360,000, but rather than have him pay it back all at once it’s helpfully deducting $5,135 a month from the convict’s continuing pension payout. “By the time he gets out,” Kasler explains, “he will be collecting 70 percent of his original pension—or $141,228 a year before taxes.”

Taxpayers are the real victims of this ruling-class rot. Under state law, Fred Buenrostro is still entitled to his pension, but taxpayers should not expect that to change. As long as duly convicted felons can continue collecting fat government pensions, the corruption is likely to continue. Jon Coupal of the Howard Jarvis Taxpayers Association once suggested that politicians get two terms, one in office and the other in prison. Perhaps that plan should be extended to government pension bosses.

Using the National Debt for Leverage Against the U.S.

Thursday June 2nd, 2016   •   Posted by Craig Eyermann at 6:07am PDT   •  

In April 2016, we considered the use of national debt as a weapon through Saudi Arabia’s threat to sell off its large holdings of the U.S. national debt and other assets. The threat comes in response to the possibility of the U.S. Congress acting to declassify 28 pages of a report about the role of foreign individuals and charities in funding the terrorists behind the September 11, 2001 attacks on the World Trade Center and Pentagon.

The following CNN report from September 8, 2014, discussed what is believed to be in those 28 pages, which the Obama administration is hiding from the American people despite President Obama’s promise to make them public.

President Obama responded to the call to finally make good on his promise to the families of 9/11 victims by threatening to veto the bill pending in Congress that would release these redacted pages of the report to the public. By all appearances, the administration is caving in to the Saudi government’s economic blackmail demands.

For now, it seems that the earliest the White House might release any part of the 28 pages would come in mid June. Since the administration has had years to address the issue, so to say that it has no sense of urgency in the matter would be a great understatement.

The U.S. Treasury Department has published data indicating that Saudi Arabia’s direct holdings of the U.S. national debt total $116.8 billion as of March 2016, which is approximately 0.6% of the U.S. government’s total public debt outstanding.

Saudi Arabia is also believed to have significant indirect holdings of U.S. debt securities, many of which our Treasury Department attributes to other nations, whose banks serve as intermediaries for the Saudis.

But if the Saudi’s total holdings are no more than $116.8 billion, the figure that represents its direct holdings, then it’s pretty remarkable to see just how much leverage against the U.S. president this amount appears to give the Saudis. One can only imagine what kind of accommodations the Chinese premier receives since China has lent the U.S. government over 12 times as much money as the Saudis have.

Predatory Teachers Cost Taxpayers $300 Million in Four Years

Wednesday June 1st, 2016   •   Posted by K. Lloyd Billingsley at 8:45am PDT   •  

bored_student_MLWhen taxpayers count the cost of government, they would do well to include the tab for waste, fraud and abuse by the government monopoly K-12 educational system—particularly abuse.

As Richard Winton and Howard Blume of the Los Angeles Times report, the Los Angeles Unified School District, second-largest in the nation, missed a series of cases involving “teacher misconduct” and “the result is a trail of victimized students and massive payouts to victims and attorneys that have surpassed $300 million in just the last four years.” The teacher misconduct involves blatant and longstanding sexual abuse, and the LAUSD, “in some instances, continued to employ teachers who were under a cloud, or ignored or overlooked direct complaints.”

As outraged parents have learned, California’s government monopoly education system makes it practically impossible to fire teachers, whatever the gravity of their offenses. For a full decade LAUSD officials ignored complaints against teacher Robert Pimentel of De La Torre Elementary, who was eventually convicted of child abuse and sentenced to 12 years in prison. Pimentel cost the LAUSD $58 million in sexual abuse payouts, and the district has spent a staggering $200 million on claims made by students in the case of a single teacher, Mark Berndt. In 2011 Berndt was found with “hundreds of photos of his third-grade students—bound, gagged, crawling with cockroaches and sometimes fed semen.” The LAUSD paid Berndt $40,000 to resign, and he retains lifetime health coverage and a pension totaling $3,891.17 per month.

Teacher unions also went to bat for the abuser.

As Larry Sand explained in City Journal, the California Teachers Association and California Federation of Teachers endorsed AB 375, a bill written “in response to Berndt’s heinous crimes,” but which gave “teachers like Berndt even greater protections against dismissal than they currently enjoy.” Governor Jerry Brown vetoed the bill, but for parents and taxpayers the reality remains clear: Neither education bureaucrats nor teacher union bosses are eager to remove abusive, predatory teachers. That reluctance endangers students, distresses parents, and will surely wind up costing taxpayers more than $300 million. As the Los Angeles Times reporters explain, “more cases are outstanding” in the matter of Mark Berndt, whose career spanned more than 30 years.

Marking Memorial Day at the VA

Monday May 30th, 2016   •   Posted by Craig Eyermann at 3:00am PDT   •  

memorialIn the United States, we celebrate Memorial Day to remember and honor the Americans who died while serving in the military services of the nation. As a holiday, it began informally in the late 1860s, where it was first called “Decoration Day“, which arose in the cities and towns whose families had provided so many of the soldiers who had lost their lives during the Civil War, whose graves were decorated with flowers to remember their lives and to mark their loss. A little over a century later, in 1971, Memorial Day became an official holiday for all of the United States.

We mark the loss of those who died in the military service of the country because their lives meant something—not just to their particular branch of the military, whether it be Army, Navy, Air Force or Marine—but to their families, where the loss of their lives has left behind holes in the fabric of their communities that can never be fixed.

So on this solemn day, what are we to make of the remarks of the Secretary of the Department of Veterans Affairs, Robert McDonald, who compared living veterans waiting days and weeks to have an appointment for treatment at the VA’s hospitals and medical service centers to the long lines at Disney theme parks on Monday, May 23, 2016.

The New York Times reports:

At an event with reporters on Monday, Mr. McDonald was asked why the department did not publicly report the so-called create date when veterans first ask for medical care, which could be used to calculate how long they are waiting in lengthy backlogs for their appointments.

“The days to an appointment is really not what we should be measuring,” Mr. McDonald responded. “What we should be measuring is the veteran’s satisfaction. What really counts is how does the veteran feel about their encounter with the V.A.? When you go to Disney, do they measure the number of hours you wait in line? What is important is, what is your satisfaction with the experience.”

Writing at Forbes two days later, Adam Andrzejewski explains why McDonald’s remarks are so dishonorable.

Two years ago, Americans were horrified to learn that as many as 1,000 of our nation’s veterans had died while waiting for medical care at Department of Veterans Affairs facilities. Any hopes of reforming the dysfunctional VA culture were dashed two days ago when Secretary Robert McDonald made an appalling comparison to waiting in line at Disney parks.

Adam Andrzejewski is the founder of OpenTheBooks, which is a non-profit organization dedicated to increasing the amount of transparency in federal government agencies for how they spend the money they put U.S. taxpayers on the hook for paying through their federal taxes. OpenTheBooks has just issued a new report looking at how the Department of Veterans Affairs is addressing the scandal of its deficiencies in providing medical care to living veterans seeking it.

Between OpenTheBooks’ report and his Forbes article, Andrzejewski identifies the following key findings and facts for what his organization discovered about the VA’s spending in the two years since the scandal that revealed its mistreatment of U.S. veterans seeking medical care first came to light.

  • Today, nearly half a million veterans still wait to see a VA doctor. According to USA Today, more than 480,000 veterans were waiting more than 30 days for an appointment.
  • The VA lawyered-up during the scandal—adding 175 more lawyers (2012-2015)—spending $454.4 million on ‘General Attorney’ salaries and bonuses. With 1,060 lawyers on staff, the VA now has more lawyers than all but the fourteen largest private law firms in the USA.
  • In an attempt to improve its image, the VA has spent $99.4 million on ‘Public Affairs’ (PR) salaries and bonuses since 2012. In 2015, the VA employed a PR corps of 304 officers—up from 262 officers in 2012.
  • Even after “reforms” were instituted, we found that one of every two bonuses continued to flow to the same people who collected bonuses during the scandal.
  • Since 2012, total annual salaries increased by 168 percent over the Consumer Price Index (CPI).
  • Since 2012, total annual salaries spending increased by 18.7 percent.
  • While long wait times persisted the VA added 39,454 new positions to their payroll between 2012-2015. Fewer than ten percent of these new positions (3,591) were ‘Medical Officers,’ i.e. doctors.

To understand why the VA has hired so many lawyers and PR flacks in proportion to the number of actual doctors it has hired, please consider the following story from Jonah Bennett of the Daily Caller News Foundation:

A Phoenix VA supervisor, who managed the secret wait list in 2014 where dozens of vets died, was caught denying specialty care appointment referrals to veterans in a petty power play.

Pauline DeWenter, supervisory medical administration specialist, fired off an email May 20 telling other VA staff of her decision to instruct medical support assistants not to schedule consults for veterans in podiatry, according to emails obtained by The Daily Caller News Foundation. A consult is an appointment with a specialist....

“The story her[e] is that she’s preventing access to care for Veterans again, not by hiding their appointment’s in a drawer, now by openly telling her staff not to schedule them,” a whistleblower told TheDCNF. “That is why the chief of podiatry vehemently complained.”

DeWenter was a key actor involved in maintaining the secret wait list at the Phoenix VA in 2014, which kicked off a national scandal and put the VA through serious scrutiny. She was responsible for managing and handling the list—where veterans were placed when management wanted to completely ignore them for the purpose of improving wait time statistics, all the while these veterans languished without care. At least 40 vets died while waiting for care on these lists.

How many more graves will be decorated this Memorial Day as a direct consequence of the VA’s continuing failures to provide medical care to the nation’s veterans from doctors when they need it most—while they are still alive?

The Developing Bailout of Puerto Rico

Thursday May 26th, 2016   •   Posted by Craig Eyermann at 6:25am PDT   •  

capitol2A major step toward the bailout of the bankrupt government of the U.S. territory of Puerto Rico was taken on May 25, 2016, when a draft of the “Puerto Rico Oversight, Management, and Economic Stability Act” (PROMESA) advanced from a Congressional committee with bipartisan approval. The Wall Street Journal describes the bill now pending in the U.S. House of Representatives.

The legislation would create a debt-restructuring process and empower a federal oversight board to supervise what is shaping up to be the largest municipal debt workout in American history. The measure wouldn’t spend any federal money.

The House Committee on Natural Resources, which has oversight of federal territories, advanced the bill on a 29-10 vote, with 14 Republicans and 15 Democrats backing the legislation.

The bill, which produced a rare moment of bipartisan cooperation in an election year, has drawn strong opposition from some bondholders and other political groups that spent millions of dollars on television advertisements to defeat it.

However, passage of the bill before July 1, 2016, when Puerto Rico will likely default on an additional $2 billion payment on the money it owes to its creditors, most notably insurance companies Ambac, MBIA and Assured Guaranty, who loaned money to the territory’s commonwealth government and its institutions based in part on Puerto Rico’s constitutional guarantee that it would fully honor its debt obligations. A restructuring of Puerto Rico’s debt that doesn’t make these institutions whole would affect their ability to pay annuities to Americans who put significant portions of their savings into these investments in order to provide a steady stream of income throughout their retirements. A stream of retirement income that the legislation may now be putting at risk.

Writing at RealClearPolicy, American Consumer Institute president Steve Pociask raises concerns that the legislation represents a real blunder:

At the White House’s prodding, the U.S. House of Representatives recently introduced the second version of its “Puerto Rico Oversight, Management, and Economic Stability Act” (PROMESA), which would allow Puerto Rico to restructure its debt in much the same way as bankrupt companies. The legislation, which underwent a superficial rewrite following its original introduction in April, is unique considering that states are not allowed to file for Chapter 9 bankruptcy and that Puerto’s Rico own constitution requires it to meet its debts obligations.

In effect, PROMESA’s vague language allows a powerful and unelected “oversight board” to decide who it wants to protect. For example, the board has the option of bailing out fund-depleted government pension systems ahead of bondholders, who have a constitutionally-mandated priority over all other government expenses. Many of these bondholders are retirees who have put their life savings into bonds and mutual funds. They could find themselves in financial straits, if PROMESA is signed into law.

Pociask goes on to describe how Puerto Rico arrived at its current predicament. We recommend reading the full article—the problems it describes apply to every state and local government entity in the United States.

Secret EPA Slush Fund: Who Will Get the Remaining $3.5 Billion?

Wednesday May 25th, 2016   •   Posted by K. Lloyd Billingsley at 8:00am PDT   •  

9655710_MLAs we noted in 2013, it is possible for an EPA “policy advisor” such as John Beale to falsify his employment record, claim that he actually works for the CIA, and maintain this ruse for 20 years while bagging fat bonuses but performing no actual work of any value. The EPA’s secret agent man cost taxpayers approximately $1 million, but as Daily Caller writer Ethan Barton shows, Beale’s caper was hardly the only secrecy going on at the powerful federal agency.

Two EPA committees “secretly control how billions of dollars are spent” and from the EPA’s annual $1 billion Superfund program “the agency has accumulated nearly $6.8 billion in more than 1,300 slush fund-like accounts since 1990.” The EPA’s National Risk-Based Priority Panel and the Superfund Special Accounts Senior Management Committee “meet behind closed doors twice annually” and “all reports to and from the groups, as well as the minutes of their meetings and all other details, are kept behind closed doors.” The EPA has collected $6.3 billion in approximately 1,308 special accounts from lawsuits and settlements but it is “nearly impossible to determine where the estimated $3.3 billion spent so far went, or who will get the remaining $3.5 billion (after adding interest).” Reporters with the Daily Caller News Foundation were able to secure some documents but they were marked “privileged” and “could only be reviewed under EPA supervision.” That does not exactly amount to accountability.

Taxpayers may recall that last August EPA contractors released three million gallons of contaminated wastewater into the Animas River. This unleashed 880,000 pounds of lead, arsenic and other toxic materials for dozens of miles through southwest Colorado and northern New Mexico. The EPA’s alleged vigilance also did nothing to prevent the Flint water crisis but despite both disasters EPA boss Gina McCarthy kept her job. And as recent congressional hearings revealed, little has changed since the days of John Beale.

The EPA suspended a sex offender in 2006 but did not fire him until he violated probation in 2014. The sex offender’s termination was overturned and the EPA paid him $55,000 to resign. This is a federal agency, as an inspector general testified in the Beale case, with “an absence of even basic internal controls” and unaccountable to the people.

Federal Slush Fund Shovels Millions to Favored Activist Groups

Tuesday May 24th, 2016   •   Posted by K. Lloyd Billingsley at 7:00am PDT   •  

cash_money_MLAs we noted in 2013, an immigration bill pending in Congress included a hidden multimillion-dollar slush fund for left-wing nonprofits that would provide almost $300 million over three years and grow over time. A primary beneficiary of the slush fund was the National Council of La Raza, whose former senior policy analyst Cecilia Munoz played a role in drafting the legislation and became a director of domestic policy for the Obama administration. Now journalist Richard Pollock shows how federal largesse is paying off for the Raza-ists.

According to Rep. Sean Duffy, Department of Justice Officials skimmed three percent from mortgage-related bank settlements to create a slush fund of $500 million that could be steered toward activist groups the administration favors. Since the money was intended for actual victims of the mortgage crisis, Duffy told reporters, the diversion to a slush fund meant that these victims had been harmed a second time. A major beneficiary was the National Council of La Raza, which according to Pollock’s report boasts assets of $55 million and whose CEO Janet Murguia bags an annual salary of $417,000, more than the annual salary of the President of the United States. La Raza mouthpiece Lisa Navarrete told the Daily Caller News Foundation that La Raza would pocket 10 percent of a Bank of America settlement—at least $1 million—and $500,000 of a Citigroup settlement.

MEChA, the Chicano Student Movement of Aztlan, was to get $50,000 from the Bank of America settlement. MEChA is a gazpacho of Marxism, irredentism and racism, dedicated to the recovery of Aztlan, a place with origins in 60s left-wing mythology, not the history of the Aztecs. At some MEChA meetings members chant “Entre la raza todo, fuera de la raza, nada,” meaning “Everything within the race, nothing outside the race.” Despite what “progressive” apologists say, the raza is not the human race. Taxpayers should also keep that reality in mind with the National Council of La Raza. Neither group is a model of diversity and inclusion and a ballpark figure for what they should “pocket” from the federal government is zero.

U.S. Truckers to Test Drive Pension Benefit Cuts

Saturday May 21st, 2016   •   Posted by Craig Eyermann at 11:15am PDT   •  

According to Social Security’s Trustees, in 2034, all Americans who receive retirement benefits from Social Security will have their pension payments slashed by 21%.


But before that happens 18 years from now, U.S. truckers will test drive even larger retirement benefit cuts from their pensions if the U.S. Treasury department has its way, as Mike Shedlock describes:

407,000 private sector workers are about to lose most of their pensions.

I first wrote about this on April 21, in One of Nation’s Largest Pension Funds (Truckers) Will Reduce Benefits or Go Broke by 2025.

The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states applied for reductions under that law.

Currently the plan pays out $3.46 in pension benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.

The plan filed for 60% cuts in pensions. The Treasury Department has the final say. The verdict came in today: “cuts not deep enough”.

Consequently, the director of the Central States Pension Fund, Thomas Nyhan, has gone on record to confirm that unless the U.S. government bails out the fund, the pension benefits for current and future retirees from the Teamsters labor union will be cut to “virtually nothing” when the fund runs out of money in less than 10 years time.

What is happening in this case is significant because whatever action is ultimately taken with respect to the failing Teamster-mismanaged pension fund will also set the likely path that will be followed by countless local and state governments for handling their unsustainably generous pension benefits for government employees. How the situation is managed will also impact the Social Security program, which is on a similar path where it will no longer be able to sustain the generous payments it is making today to its beneficiaries.

Mark Davis of the Kansas City Star reports on the increasing stakes for those dependent upon similarly unsustainable defined benefit pension plans for their retirement income:

Retirement experts are watching Central States as a pivotal test case, the first to seek cuts for current retirees under the Multiemployer Pension Reform Act of 2014. Some say the move signals a turn toward making the problems of America’s festering pension systems into a personal crisis for individual pensioners.

David Certner, legislative counsel for AARP, warns that it threatens to create “a blueprint for companies and (pension) plans to do something similar.”

One estimate puts the funding shortage for all multiemployer pension plans at $140 billion, including up to $50 billion at the most critically short plans. The same painful reality confronts many state and local pension plans that collectively are $1 trillion short of covering what they will owe in pensions.

Sooner or later, things that cannot continue will stop. The question that must now be resolved is to what extent will regular Americans who have had absolutely no part in the mismanagement of the pensions of Teamsters and government employees will be burdened to bail them out.

World Banks Panic Selling U.S. Treasuries

Wednesday May 18th, 2016   •   Posted by Craig Eyermann at 6:35am PDT   •  

the-impact-of-the-falling-yen-on-us-import-prices-imageWhat happens when a number of the world’s central banks begin selling off their holdings of U.S. Treasury securities—the money the U.S. federal government borrows to sustain its spending?

That’s a real question today because according to CNN, that’s exactly what three of the U.S. government’s largest lenders did in the first quarter of 2016:

China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.

In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion.

It’s the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon.

The article goes on to explain their motive for selling off such large quantities of their U.S. Treasury holdings:

Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China’s economy rose and stock markets were very volatile.

In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.

The U.S. government gets one major benefit from having the world in financial turmoil—the same panic that prompted foreign central banks to sell their U.S. Treasury holdings to prop up their currencies also prompted large numbers of U.S.-based individuals and institutions to buy more U.S. Treasuries, which pushed down their yields, which means that the U.S. government can borrow more money at lower interest rates to sustain its spending, as the following chart from Bloomberg illustrates. Note the more-than-20% sustained decline beginning in January 2016:

Bloomberg: USGG10YR.IND - 10 Year U.S. Treasury - Beginning 2015-05-17 - Ending-2016-05-17

Because the U.S. government realizes this kind of benefit, it has a very strong incentive to continue to promote instability elsewhere in the world so long as it continues to sustain its deficit spending at elevated levels, as illustrated by the following chart from the Committee for a Responsible Federal Budget from January 2016.


All of which would go a long way toward explaining the Obama administration’s active pursuit of a multitude of half measures in response to various developing global crises.

Recalling California’s Stem Cell Bust

Tuesday May 17th, 2016   •   Posted by K. Lloyd Billingsley at 5:00am PDT   •  

lab test_MAs John Tozzi and Michelle Cortez of Bloomberg report on the stem cell front, “press releases, popular media, and even some journal articles routinely inflate expectations for future therapies based on early findings that probably will never turn into cures.” Now the International Society for Stem Cell Research, representing more than 4,100 researchers, wants to tone down the hype. The number of approved stem cell treatments is “pretty darn small,” and claims about cures, researchers say, “must be accurate, circumspect and restrained.”

That is good advice, but it comes a little late for California researchers, patients and taxpayers alike.

As we noted, California’s $3 billion Stem Cell Research and Cures Act, Proposition 71, promised life-saving cures and therapies for a host of afflictions, including heart disease, diabetes, Alzheimer’s and Parkinson’s. Celebrity promoters included Christopher Reeve, Michael J. Fox and Arnold Schwarzenegger. In 2004 voters approved the measure, which created the California Institute for Regenerative Medicine. CIRM drew down the money and spent lavishly, but ten years later in 2014 not a single cure or therapy had reached the clinic, and none was likely to do so. By late 2015, according to David Jensen of the California Stem Cell Report, CIRM had produced no cures but sought to spend $620 million on clinical work and translational research, including $50 million for “educational programs” and another $50 million for “infrastructure.” CIRM plans a number of “translating” centers, at $15 million a pop, “to negotiate federal rules and regulations, and win ultimate approval of a therapy.”

In practice, this state agency has always functioned as the California Institute for the Redistribution of Money. Heavily insulated from legislative oversight, CIRM awarded huge salaries and provided a soft landing spot for over-the-hill politicians. CIRM bosses are certain to don the white coat of medical science and seek more money from the people. Taxpayers might keep in mind their actual record: $3 billion spent without any of the promised cures or therapies.

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