Detroit has been a client of Gabriel Roeder since 1938, when the city first started offering pensions. Now the city is bankrupt, the pension fund is short, benefits are being cut and one of the system’s roughly 35,000 members, Coletta Estes, is suing the firm, contending it used faulty methods and assumptions that “doomed the plan to financial ruin,” the New York Times reported today. Gabriel Roeder’s job was to help Detroit’s pension trustees run a sound plan, she says, but instead the firm covered up a growing shortfall and encouraged the trustees to spend money they did not really have. Estes’ complaint contends that the actuaries did this knowingly, “in concert with the plan trustees to further their self-interest.” The lawsuit seeks to have the pension plan made whole, in an amount to be determined at trial, and to have Gabriel Roeder enjoined “from perpetrating similar wrongs on others.” Lawsuits like the one Estes filed have also been brought against Gabriel Roeder by members of Detroit’s pension fund for police and firefighters, and the fund for the employees of surrounding Wayne County. The plaintiffs cite damage growing out of Detroit’s financial collapse, but the litigation may have implications far beyond southeastern Michigan because of Gabriel Roeder’s status and influence in the world of public pensions. Its method for scheduling pension contributions is exceptionally popular and widely used by governments, although federal law does not permit companies to use it.
