County pension plan fraud case is appealed
Police Det. Anthony Domek and Wayne County Assistant Prosecutor Molly Kettler testify before Judge Ronald W. Lowe during Daniel Kerber arraignment in Plymouth 35th District Court-December 2015.
Nov. 19, 2016 PLYMOUTH EAGLE.
Plymouth Michigan News
In the 11 months since Plymouth resident and former Wayne County Airport Chief Operating Officer Daniel Ogden Kerber was arrested and charged with retirement fraud he has lived in fear that a contractual interpretation may put him in prison for 20 years.
Kerber, 66, was arrested Dec. 9 and originally faced felony charges of larceny by false pretenses, over $100,000 and larceny by conversion, over $20,000. The conversion charge was dropped during a preliminary hearing in February before 35th District Court Chief Judge Michael Gerou. The false pretenses charge carries a maximum penalty of 20 years in prison.
Wayne County officials claim Kerber had a severance agreement that specified that his defined-contribution assets of $340,166, held by Prudential, would be transferred to their Wayne County Retirement System. Kerber retired in September 2009 and began receiving a monthly pension of $11,337.48. At Kerber’s request, according to prosecutors, Prudential deducted $62,736.61 in taxes from his total retirement savings and sent Kerber a check for $277,431.40 on May 2, 2011. Kerber continued to accept the monthly pension payments after making the withdrawal of his 401K funds and the retirement system never notified him that it believed he owed money or had breached the agreement. The first time Kerber was contacted about the issue was in July 2015 when he was told that his pension was being terminated unilaterally without an administrative hearing.
Kerber pleaded not guilty at his arraignment before 35th District Court Judge Ronald Lowe and was given a personal recognizance bond and ordered to surrender his passport following his arrest in December.
While vacationing at his Florida home, Kerber received the call that there was a warrant for his arrest and immediately returned to Plymouth to turn himself in to authorities, according to his attorney Robert Mullen. After numerous filings in the 35th District and Wayne County Circuit Courts, going before four judges, two of whom recused themselves to avoid a potential conflict of interest, Kerber’s case is now headed to the State Court of Appeals.
Mullen said this is a case about a contract interpretation and not about a crime. Mullen adamantly states the case defies traditional analysis because it doesn’t have the usual criminal elements. “It’s a civil case,” he said. Mullen has cited what he calls critical key issues in his appeal of the charges and claims the district court erred in its interpretation of his client’s severance agreement. According to Mullen’s court filings, a disagreement with the contract made between Kerber and the Airport Authority in 2009 and the Wayne County Employees Retirement System has turned into a criminal prosecution in an attempt to enforce alleged contractual obligations.
“The prosecution’s criminal charge is based entirely on a duty imposed by a contract, one that’s ambiguous, uses permissive language and even the judge remarked ‘is not a very good contract,’ Mullen said.
At the time of Kerber’s arrest, Wayne County Prosecutor Kym Worthy spoke out in an unusual public indictment against him.
“This case is the ultimate example of why the Wayne County Retirement system is not property funded. The alleged facts in this case will show that the defendant’s greed allowed him to net hundreds of thousands of dollars he was not entitled to, all while he received over $11,000 a month in a pension from the county.”
Mullen is critical of Worthy’s actions.
Mullen said Wayne County officials had to approve the specific contract clause that allowed him to transfer his Plan 5 assets. He said they had to know he had a defined contribution account “because they gave him the money.”
“Isn’t it odd that the Wayne County Prosecutor is prosecuting this case, are they really being objective? The Wayne County prosecutors are in the same retirement system. This is a conflict of interest,” Mullen said.
The Airport Authority that employed Kerber is a for-profit entity, separate from Wayne County. The Wayne County Retirement System administrates the pension plans.
Mullen claims in court documents that at all times the funds were the property of Kerber, held in a 401K account that remained in his name and no transfer of ownership ever occurred. He claims that the retirement system knew about Kerber’s severance agreement. Regular statements issued over the years showed Kerber as the owner of the funds.
“How can you steal your own money?” Mullen exclaimed.
Kerber believed that the funds in his defined-contribution Plan 5 belonged to him. Mullen referencing this in his filings states that the agreement language is permissive and it will allow him to transfer the funds, not that he shall or must.
During the preliminary court examination on the charges, Kelly Tapper, the division director at the Retirement System testified that Kerber’s severance agreement was a Plan 5 hybrid plan with two parts, a defined-contribution portion (401K) and a defined benefit portion (pension) and the defined contribution portion of the plan was administered by Prudential.
Tapper repeatedly testified at the preliminary examination that although Kerber’s severance agreement allowed him to transfer his Plan 5 assets into Plan 1, doing so is impossible.
Mullen says the entire case boils down to the meaning of one paragraph in Kerber’s severance agreement, Paragraph 3, and one word, “allow.”
“…The Authority agrees to allow Employee to transfer his Plan 5 defined contribution pension assets to Plan 1, and elect Plan 1 as his retirement plan…”
Mullen argues that Kerber’s severance agreement includes no mandatory language whatsoever, is so poorly drafted as to be susceptible to various interpretations of what he calls an ambiguous clause in the contract. Mullen says the case is not only a contractual impossibility but a criminal impossibility.
Mullen said that he and Kerber are looking forward to the State Court of Appeals to schedule the show cause hearing and dismiss the case.
Photos: © Don Howard / Associated Newspapers of Michigan