|MERS History: 2008-2009
September 13, 2012
In early 2008, a small group of
former MERS employees got together because they were concerned about
unethical goings-on at MERS, most of which had occurred after I
retired in 2004. Over a few months, we met to share information and
discuss what to do. On November 12, 2008, we met with state
representative (now senator) Rick Jones and told him of our
concerns. In a January 9, 2009
he told us of his unsuccessful attempts to interest the state
attorney general, the state Office of Financial and Insurance
Services, and the state Office of Retirement Systems and said:
I suggest you go to the full
board of directors with your concerns, however if you and your
colleagues do not feel comfortable coming forward, I will be
happy to send a letter to each member on the governing board
addressing your concerns without mentioning your names.
The group dissolved without taking
further action (as far as I know).
The following is from notes and
emails created during that time. Alterations have been made to the
original text to conceal the authors.
It was great to see everyone
again. We had I think a very good meeting. It was decided
that as a group we will focus on the following:
[ ]: Will talk with Sally
Dreeves at a high-level just posing certain questions around
Premier Health to see if the board is concerned about the
misappropriations of monies sent to Premier Health and how
will they ensure the LLCís recently created are profitable
investments for the Defined Benefit plan? What rate of
return is the board expecting from these companies? Who is
holding the CEO accountable if the ROI is not achieved?
[ ]: will try to produce a
muni contact listing
[ ]: Will contact Rick
Jones or Mike Cox to see who or what our next steps might be
for bringing this information forward to the membership or
[ ]: Will provide some
talking points regarding information I discovered on the
financial statements of Premier Health and MERS.
Please don't send emails or
discuss what our plans are with anyone outside of this
team. We must keep this information confidential until we
know what we are going to do with the findings.
As of 12/31/2007 MERS DB
plan has provided MERS Premier Health Trust with
$10,350,000.00 monies that have been removed from the DB
plan to fund Premier Health Trust as a surplus note of 8%
annum. But this note has no stated maturity or repayment
date. The principal and interest are to be paid only upon
the dissolution of the Premier Health. This means that MERS
DB plan continually gives money to Premier Health
Trust which they never have to repay back unless Premier
Health Trust is dissolved. All of this information is
contained in Footnote #5 of the Premier Health
Trust financial statements ending 12/31/2007.
Also, according to the MERS Premier
Financial Statements of 2007 foot note #5
1. MERS Premier Health
Trust has no employees and all services are contracted from
MERS defined benefit plan. So, this means that the salaries
and all administrative costs for the employees working for
Premier Health insurance are also being taken from the MERS
defined benefit plan and not reported as a cost to MERS
Premier Health Trust. All of these costs are being absorbed
by MERS and added to the MERS DB administrative costs.
2. According to the 2005,
2006 and 2007 MERS Premier Health Trust had a net loss of
-213,600, -1,488,400, -5,122,348 respectively for each of
the years totaling -$6,824,388.
3. What is the contingency
plan for MERS defined benefit in regards to MERS Premier
Health Trust? How much money are the board and their members
willing to absorb to fund MERS Premier Trust? We are now at
$10 million when does the bleeding stop?
4. Also, on a much smaller
note: MERS defined benefit is also investing into LLC's
through the private equity portion of the MERS defined
benefit portfolio. These two start-up companies are a way
for MERS to hide administrative costs. These costs are now
being buried in the private equity piece of the DB
investment portfolio. The two companies are TEGRIT and
COBALT Community Research.
TEGRIT are the GRS [actuary
Gabriel, Roeder and Smith] consultants that are being paid
to support the MERS MAPS system. In years past, MERS paid
internal resources and PeopleSoft for the maintenance of the
applications and database. Why did MERS feel it was
necessary to create an LLC company to house these costs? By
creating an LLC these costs is not part of the MERS
administrative costs. These costs are now taken directly
out of the private equity piece of the DB portfolio. What
rate of return are the MERS board members expecting to see
for the LLC's? 10% 15%? How will the MERS board members
hold the CEO accountable for producing a rate of return that
is equal to or above what the private equity portfolio
returns? Jeb Burns [MERS chief investments officer] once
[said] that the MERS private equity piece in the portfolio
returned on an average of 17%. I do not believe TEGRIT can
produce a rate of return of more than 17% when most fortune
500 technology companies are lucky if they can get a 5%
return each year.
COBALT Research: This was
a company where William St. Amour's salary and any of his
direct reports are being booked. Just like TEGRIT solutions
these costs are being taken out of the MERS private equity
piece and not being accounted for in the MERS administrative
Lastly...I just noticed on
the MERS web site they are looking to hire a Comptroller for
TEGRIT. I have cut and pasted the piece that says that
TEGIT is a company of MERS (see below). This is
unbelievable. So not only does TEGRIT have a CEO that is
paid in upwards of $250,000 they are hiring a Comptroller
too. When we issued the FOIA request of MERS for the
financial statement of TEGRIT
their response was "MERS does not own, use, possess, or
retain the requested financial records. Cobalt and TEGRIT
are both independent legal entities separate and apart from
MERS." and it also stated that MERS has invested
private equity assets into these companies they do not have
copies of their financial statements". How do MERS board
members expect to hold the CEO accountable for these
investments if they are not reviewing the financial
statements? Also, how can MERS place an advertisement on
Career Builder looking for a Comptroller and state that
TEGRIT is an LLC of MERS of Michigan Company? Something
smells very fishy here.....
This was from the
advertisement on Career Builder looking for a Comptroller
The Municipal Employees'
Retirement System (MERS) is a statewide retirement plan and
tax-qualified trust that municipalities may adopt for their
employees. MERS offers employee benefit programs: defined
benefit, defined contribution and hybrid plans, and group
insurance products. MERS serves cities, counties, hospitals,
libraries, medical care facilities, road commissions,
townships, villages, and similar units of local government.
This position will support Tegrit Financial Group, LLC, a
MERS of Michigan Company.
Ok. Sorry for such a long email...hopefully, I have
provided enough information as talking points so that we are
all on the same page. [ ] and [ ] let us know when you have
made your contacts and we will all try to get back together
to discuss our next steps sometime late July or early
Enjoy you summer and keep in touch.
Thought you might be interested in some details about MERS.
Upon Kathy House's retirement, Lynda was placed in an
interim position as the Officer. Not long after this
announcement, the Marketing staff was pulled into a meeting
with Carrie Lombardo and the Insurance staff to inform us
that these two departments were merging into a newly created
office of marketing and employer services known as OMES with
Carrie leading the way and demoting Lynda back to a manager
(while maintaining the same pay as an officer).
Not long after that we were moved into a new building and
told we were going to be split into teams to accomplish
improved sales. Therefore the 4 employer relations
representative jobs were going to be dissolved and we would
all need to re-apply for a different job. They included
Regional Manager (5 positions), Benefit Plan Advisor which
was the sales position (2) and the Benefit Plan Coordinator
(2 positions). All ER relations reps applied for the
regional manager positions and went through the interview
process with Lynda, Carrie, Jennifer Mausolf (now a
Marketing Manager who doesn't manage anyone), Caryn Mateer
and Ginny Gibson the Insurance Manager.
Only one rep was offered a Regional Manager position, it was
the newest MERS employee who had not finished her training
and one who had not yet been sent to municipalities alone.
Two other employees were promoted to Regional Manager, Rob
Noa and Sue McNally.
From there MERS proceeded to hire Caryn Mateer's brother for
a Regional Manager position. His name is Tony Radjenovich
and also Michael Strader who is an alleged friend of Carrie
Lombardo's husband. They were provided no formal training
other than one meeting on how to interpret an annual
valuation and were sent out to "service" the participating
municipalities. Multiple complaints have been filtering in
on the regional managers as they have no clue what they are
talking about and providing the membership incorrect
In the meantime, MERS created a company called Tegrit
Financial Solutions out of the private equity portfolio.
You might want to dig into this a lot further as the
employees of this company are being filtered through MERS
Premier Health as MERS members when they actually work for a
private company. Therefore, violating the rules set
forth by the Office of Insurance with the State of
Michigan. This information was provided in conversation by
members of Finance. The CEO of Tegrit is Stephen Garrow
from New York.
Although my name will appear on the email, I offer this
information on an anonymous basis and offer you good luck in
obtaining more data. . . .
||This is from
an email I sent to a group member who missed a meeting this
We had our
meeting with Representative Rick Jones today at my house.
Just [ ] and I were there. [ ] described for Rick the
financial improprieties taking place at MERS and gave him
documentation. He is going to talk to someone in the
Attorney General's office and see if they are interested in
pursuing the matter.
Rick had already been involved in a lawsuit against MERS
over MERS' claim that they didn't have to pay property taxes
on vacant land owned by MERS adjacent to the office.
Apparently it went all the way to the Michigan Supreme
Court, which decided in favor of MERS. Legislation was then
introduced to clarify the matter, but it never got out of
Our issue is that MERS is using money from the
municipalities' pension funds to finance MERS-initiated
business ventures, including a health insurance company
called Premier Health, an IT company called Tegrit, and
another company called Cobalt Community Research (I don't
remember what they do). (Doesn't this sound a bit like
Enron?) Chances are, these companies will never turn a
profit, but the losses won't be apparent because MERS is
paying a good share of their expenses and hiding the fact
with deceptive accounting.
What we don't know is who benefits from these ventures. The
managers of these companies are likely making good money,
but what does Anne get out of it? Is it just an ego thing,
where she gets to be a big shot wheeler-dealer? Or does she
somehow benefit financially? Curious people want to know.
[ ] also told Rick about MERS' generous
program. [ ], [ ] and [ ] all were in Masters degree
programs at U of M which cost over $100,000 if completed. [
] and [ ] completed theirs. [ ] withdrew when [ ] quit MERS.
[ ] quit either before or soon after completing [ ]. None of
them were required to repay MERS.
Other news: [ ] reports that [ ] got fired over a minor
infraction of company rules.
[ ] emailed me . . . with
some comments. He pointed out that Premier Health and
Cobalt are nonprofits, so by definition they cannot turn a
profit, and cannot be justified as a private investment
(unlike Tegrit). He also wonders if there are legitimate
(business) needs for the tax exempt structures: to have a
venture separate from MERS, or are the structures simply to
skirt constraints that would apply to MERS as a
quasi-governmental entity. For example, labor rules, salary
constraints, accounting for how the money was spent to the
MERS board. [ ] wonders if for Anne, it's more the latter -
to skirt rules that would otherwise apply, pay higher
salaries, hire her friends, and maintain closer control.
Regarding Cobalt, [ ] says
since it is a 501c3 plan, it's required to be pretty
transparent. We should be able to get a copy of the form
990 if we don't already have it; it would disclose a lot of
details of the source of funds and what they were used for.
The same thing goes for MERS Premier Health.
He says he thought you told
us you thought Cobalt might be a shell entity to conduct
surveys regarding municipalities' satisfaction with MERS
services. If MERS is a large donor, it would apparently be
at least a conflict of interest for this company to perform
the service for MERS, unless the relationship was properly
disclosed to Municipalities. Maybe not illegal, but
potentially at least a little deceptive.
[ ] says that Steve Garrow,
the Tegrit CEO, is an old buddy of Anne Wagner's from a long
way back. He used to be a broker at Hoenig and eventually
started his own brokerage firm, Fano Securities. It doesnít
look like he necessarily has the education or experience to
be the CEO of an IT company.
[ ] also noticed in the
minutes for the 12/8/2004 MERS board meeting that an old
buddy of Anne's, Tim Farmer, became a board member. [ ] says
Farmer was a broker in town and Anne was his assistant years
ago before she started at MERS. The minutes say that he,
along with Sally Dreves, would officially become board
members 1/1/2005. I (Steve) could find no mention of him in
the minutes for subsequent meetings. He vanished.
Did you see Rick Jones
getting zapped by a Taser on the news tonight? If you missed
it, it is on the Lansing State Journalís website.