This week three former Detroit officials were convicted of, variously, bribery, fraud, and extortion in their management of the city’s pension fund. The WSJ reports on the verdicts delivered against the city’s former treasurer, a former pension attorney, and a former pension trustee:
The evidence at trial, according to federal prosecutors, showed that Detroit’s two retirement systems lost more $97 million on pension deals corrupted by bribes and kickbacks taken or paid by the defendants.Messrs. Beasley, Zajac and Stewart conspired with each other and, prosecutors alleged, with former Detroit Mayor Kwame Kilpatrick and others to take bribes and kickbacks in return for votes on investment decisions made by the boards of trustees of Detroit’s two pension systems.
We’re glad to see these people caught, but they represent just a small part of a much wider corruption that has crippled many municipalities across the nation. In some cases that corruption was as criminal as the kickbacks in Detroit, in others it was more in the manner of structural mismanagement. But either way, many of the deeper problems that lead to the nationwide pension crisis remain unaddressed, and the conviction of a few offenders who were unlucky enough to have been caught doesn’t change that fact.In any other situation where systemic fraud and mismanagement led to huge losses for ordinary people, Democrats would be calling for tighter controls and regulation. But when it comes to the scandal of public pension fund abuse, Democrats by and large still stand behind their labor union allies and corrupt municipal machines—who are repeatedly implicated in scandals. Tight regulation of public sector pensions might protect workers, but it would also make it harder for politicians and union leaders to play games with pension promises. Without it, local government workers, taxpayers, and residents stand exposed to huge risks.