Superior Court Rebukes Attempt By GERS Board Chairman To ‘Quash’ DOJ Subpoena

ST. CROIX — A motion filed in Superior Court here on October 30 that sought to “quash” a subpoena that Acting Attorney General Claude Walker issued on October 9 to the Government Employees’ Retirement System’s (GERS) board Chairman Wilbur Callender, which would force Mr. Callender to provide the pension system’s investment records to the Virgin Islands Department of Justice for review, was rebuked by the court, citing lack of basis for the petition.

“The petitioner does not cite to any basis for invoking the court’s jurisdiction, or clearly assert what the procedural mechanism of being pursued to obtain the relief sought,” reads the court order, seen here, adding that the petitioner was also “unverified.”

It added: “Based upon the language of the petition, the court indicated that it appeared [the] petitioner was seeking an action of injunctive relief, opted to treat the petition as a complaint, and directed petitioner to properly serve respondent as if this were a civil action.”

But even after the petitioner, Mr. Callender, complied with the court’s directive, the submitted motion did not cite any legal authority in violation of the procedural rules followed by the Superior Court.

In addition, “Virgin Islands courts have repeatedly held that unsworn statements of attorneys in motions are not evidence. Therefore, since the petitioner is not verified, and no affidavit was submitted with the Informative Motion, there is no factual basis in the record on which any affirmative relief may be granted in the petitioner’s favor,” according the court’s order.

The court ultimately denied the motion and ordered Mr. Callender to file and serve an amended pleading, “which sets for the basis on which this tribunal’s jurisdiction is invoked and legally recognized cause of action by Tuesday, November 7.”

Mr. Walker previously made a request in writing to the GERS board, stating that Governor Kenneth Mapp had sought the DOJ’s assistance in reforming the retirement system. But Mr. Callender bucked at the request, and stated in a board meeting held in late September that the only reason the request was made was because Mr. Mapp, through the AG’s office, wanted to takeover GERS.

At a press conference in February, the governor said GERS was throwing away tens of millions of dollars in bad investments, all while failing to pay retirees. He said he was acting to, in effect, “take control” of the government-owned entity to get it back on course.

The governor detailed some of what his administration found during an assessment it conducted of GERS and its programs, giving two examples of what he deemed as careless and wasteful spending by the board.

“We had GERS at Government House talking about this issue of our retirees who have retired and have waited more than a year to receive their annuities,” Mapp began. “In several instances, the amount of monies owed to retirees, some who have waited more than a year, we’ve seen on this list here $1,400 owed by the government, $2,400, $3,300, and their retirement annuity benefits were withheld from them.”

He continued, “But while this has been going on, the retirement system has been literally throwing away retirees’ money, who are part of Government Employees Retirement System, in droves.”

Mapp also highlighted an “investment scheme” gone bad.

“The retirement system entered into an investment scheme, claiming to use an actuary to determine a group of individuals who are not members of the GERS, for which the retirement system would purchase term life insurance on these individuals. The amount that the retirement system released for this investment scheme was $50 million. On the maturity of this investment, or when these people die, the retirement system would recover $120 million,” the governor explained.

“During the ongoing process of this investment,” Mapp continued, “the GERS received back on the $50 million, $8.8 million, and then found itself with an investment entity that was going bankrupt. So then, the GERS made available to the entity to try and keep it afloat, another $10 million.

“The GERS board has written off already 20 percent of the original $50 million as not going to ever see anything on that. For those of you who may be having difficulty with that 20 percent, that’s $10 million. And now, trying to sell the remaining part of the portfolio for $7.7 million and call it a wash. So in effect, they gave up $60 million, and expect, at best, to receive $15 million at the end of the scheme,” Mapp explained.

In detailing GERS’ relationship with the Carambola Beach Resort on St. Croix, the governor again revealed troubling decisions he said were made by the board, where funds were poured into an investment with no assurances that GERS would recoup funds invested, far less make a profit on it.

“We know that the GERS loaned monies to the principals out at Carambola — $15 million on a property that was worth $4.5 million,” Mapp said. “We know that the principals of Carambola paid on that $15 million loan, two payments totaling $1.25 million.”

Mapp continued to expose the faulty investments made by GERS in relation to Carambola Resort, and also revealed a $20 million purchase offer from Marriott  — an offer GERS has yet to respond to.

“As of December 31st, 2014, the GERS has dumped another $11 million in the Carambola property, [totaling] $26 million on a property valued at $4.5 million,” Mapp said. “And it is their plan, according to their executive director, to dump several more millions on the guise of constructing a casino so that the property can at least attain a $7 million value.”

He continued, “We received a copy of a proposal that was sent to the GERS with an offer to purchase the property by one of the Marriott entities for $20 million, and those parties — they sent the full file — have not yet received a reasonable reply from the Government Employees Retirement System.”

Mapp said he would be naming “new members of the board of directors of the GERS, and taking control of that entity, because while, in just those two instances, they laid $86 million down on the table, they have staved off their membership from having access to their benefits on the claim that the government has not put in $2.1 million in government contributions. And so those retirees remain out on the street, waiting for their benefits, some with payments as small as $1,300.”

“You will make the judgement call on the soundness of those decisions,” Mapp concluded.

At the meeting in September, GERS board members said the letter from AG Walker requesting investment details asked for trade dates, transaction types, security descriptions and more.

Feature Image: Acting Attorney General Claude Walker.