Detroit Emergency Manager Kevyn Orr orders investigation into employee benefit programs

(WXYZ) - Detroit Emergency Manager Kevyn Orr has signed an order opening a joint investigation by the Inspector General and Auditor General into possible waste, abuse, fraud and corruption associated with Detroit's two employee benefit programs.


This emerges as the Emergency Manager's staff is holding two closed door meetings with employees and retirees telling them how their benefits could be cut in the future.

Detroit has a deficit of $17 billion dollars.

The two employee pension funds are underfunded by $3.5 billion and retiree health care is underfunded by $5.8 billion.

One pension fund is for police and fire Detroit employees and the other is for other non-uniform employees.

Both have about $5 billion dollars and for now are controlled by two boards of trustees who are elected by employees and appointed by the mayor and city council.

This new investigation is on top of past trustees indicted by the feds in pay for play schemes including former Detroit City Treasurer Jeff Beasley under former Mayor Kwame Kilpatrick - whose case is pending in Federal Court.

The Police Retirement System of the City of Detroit released the following statement after Orr signed the order: 

The Retirement Systems of the City of Detroit understand that the Emergency Manager has issued an order to direct the Auditor General to conduct an investigation into the City's benefit systems including the two pension systems. While we have reservations about the EM's authority to conduct an investigation under Public Act 436, we will fully cooperate with any reasonable requests for information as we have with respect to any duly authorized investigation.

The pension systems have fully cooperated with the ongoing federal investigation and will continue to cooperate. In a few isolated incidents, indictments occurred related to a former Trustee under a previous administration and an attorney. Those cases have not yet been heard in a court of law. We support the uncovering of any wrongdoing and prosecution to the fullest extent of the law.

We are disappointed that the EM has not held any substantive meetings with the pension funds before making the decision to launch an investigation. We intend to cooperate fully.

The pension funds uncovered wrong-doing in 2012 by a former real estate advisor and terminated the relationship immediately and recovered misappropriated assets. We have already cooperated with the EM in his fact-finding mission and have provided his team with 56,000 pages of documents.

We believe the retirement systems are acting in the best interest of their members and beneficiaries including the 12,000 active and retired first responders of police and fire system and the 18,000 members of the General Retirement System beneficiaries. In fact, the Police and Fire Retirement System is performing at a level better than 90 percent of all major public pension funds in the nation.

The PFRS is 96.1 percent funded as of its latest actuarial report and has assets of $3.1 billion. The General Retirement System is 77% funded with assets of $2 billion as of its latest preliminary actuarial report.

7 Action News will have much more on this breaking development throughout the day.

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