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State Shuts Door on Guadagno Pension-Fraud Probe, But Questions Remain

Appellate court rules to withhold findings; public unlikely to ever learn role of lieutenant governor in double-dipping scheme

guadagno and christie
Credit: Governor's Office/Tim Larsen
Lt. Gov. Kim Guadagno and Gov. Chris Christie

The shadow of a pension-fraud probe continues to hang over Lt. Gov. Kim Guadagno, who acted as titular head of New Jersey government for most of last year and is widely expected to run for governor in 2017.

With a recent appellate court ruling that released some records but withheld the findings of the investigation, it is unlikely the public will ever learn why the case was quietly dropped by the attorney general’s Division of Criminal Justice, where Guadagno once served as deputy director.

As Monmouth County sheriff, Guadagno made false and conflicting statements that enabled her chief officer, Michael Donovan, to collect an $85,000 a year pension in addition to his $87,500 salary. It was one of three cases the Police and Firemen’s Retirement System board of trustees referred to DCJ for investigation.

“The concerns raised are that the taxpayers of New Jersey are being defrauded,” wrote PFRS board secretary Wendy Jamison to then-Attorney General Paula Dow in June 2011. “Please provide this office with the outcome of this investigation.”

Instead, the DCJ refused to share the findings with PFRS, leaving its board without the guidance it sought on how to handle double-dipping abuses.

“Upon a thorough investigation of this matter, it is being returned to you for whatever administrative action you deem appropriate,” DCJ Corruption Bureau Chief Christine Hoffman informed PFRS in a June 2012 letter that reported the case closed, but little else.

The Appellate Division ordered the release of those two communications after a lengthy public records battle. (Disclosure: Investigative reporter Mark Lagerkvist is the plaintiff-appellant in Lagerkvist v. State of New Jersey, #A004907-13T1, Superior Court of New Jersey Appellate Division.)

Yet the appellate panel allowed DCJ to keep secret a five-page memo that contains the findings of the investigation. In a 14-page opinion, the judges cited the “deliberative process privilege” in New Jersey law that protects some pre-decision governmental records from public disclosure.

While the probe ended without prosecution, the underlying facts of the case continue to challenge Guadagno’s credibility.

The controversy

For Kimberly Ann Guadagno, the scandal began in 2008 -- the year before she first ran for lieutenant governor on the Christie ticket.

Then-Sheriff Guadagno hired Michael W. Donovan, a retired investigator for the county prosecutor, as her “chief of law enforcement division.” She announced the appointment in a memo to her staff. The sheriff’s official website subsequently identified Donovan as “sheriff’s officer chief,” supervising 115 subordinate officers and 30 civilian employees.

As a sheriff’s officer chief -- a position covered by the pension system -- Donovan should have reenrolled in PFRS, which would have stopped his retirement checks and resumed his contributions to the plan.

Instead, Guadagno fudged Donovan’s job title, enabling her top aide to keep collecting his pension plus his new salary.

In county payroll records and a news release from Guadagno, Donovan was listed as the sheriff’s “chief warrant officer” -- a similar-sounding but lower-ranking position exempt from the pension system. A chief warrant officer is generally responsible for serving warrants and other legal documents.

A photo released by the sheriff’s office shows Guadagno attended a ceremony in which Donovan took an oath of office as chief warrant officer. Yet on Guadagno’s organizational chart, Donovan was listed as chief of law enforcement. The position of chief warrant officer was not on the chart.

In a rare comment on the controversy, Guadagno contended she hired Donovan to save as a cost-cutting measure.

“It saved the taxpayers of Monmouth County $50,000 for the year, put a uniformed officer on the street, put a well-qualified retired law enforcement officer in his place,” Guadagno told the Associated Press on the eve of the 2013 gubernatorial election.

That was not the case. According to payroll records, her personnel move cost the county an additional $75,000 a year by adding a new administrative position.

The new “uniformed officer on the street” was 48-year-old John J. Cerrato, who had been sheriff’s officer chief at a salary of $141,687 a year. To make room for Donovan, Cerrato was demoted to “sheriff’s officer captain” -- a new administrative position with a $131,521 salary.

While the county saved $10,000 on Cerrato’s annual pay, it started Donovan at a salary of $85,000. In addition, he continued to draw another $85,000 a year in pension.

Overall, the maneuver cost the PFRS pension fund an additional $245,000 -- $227,000 in retirement pay to Donovan while he served as sheriff’s officer chief plus $18,000 in pension contributions he avoided by not reenrolling in the pension plan.

Guadagno also told AP that state pension authorities had approved the hiring of Donovan. But if so, why did the PFRS board subsequently request a criminal investigation?

The investigation

In May 2011, the PFRS board voted to request an investigation of Donovan -- plus similar allegations involving sheriff’s officers John Dough of Essex County and Harold Gibson of Union County.

PFRS subsequently asked the attorney general to determine “whether (1) the retirees should be re-enrolled in the PFRS (2) the AG’s Office finds violations and will issue cease and desist orders against the appropriate county government (3) the AG’s Offices finds no impropriety or cause for further action.”

Despite Guadagno’s entanglement, Gov. Chris Christie did not use his constitutional authority to appoint an independent investigator as he later did in response to the Bridgegate scandal.

Instead, the case was assigned to DCJ.

As deputy director of DCJ from 1998 to 2001, Guadagno had supervised much of the division’s current staff. As lieutenant governor, she sits in Christie’s cabinet along with the attorney general.

DCJ is a hotbed of questionable double-dipping. In 2011, New Jersey Watchdog found 23 double-dippers who had retired from state law-enforcement jobs, then returned to work for DCJ or the attorney general’s office as investigators and supervisors. Most returned to the state payroll one day after they “retired.”

DCJ has no record that it interviewed or took statements from Guadagno, Donovan, or anyone else involved in the investigation, according to an index of documents the division submitted in court as evidence.

When DCJ concluded its probe, it decided to stonewall the PFRS and not share the results. In her 2012 memo, Hoffman briefly stated DCJ had “closed its investigation” and advised the PFRS board to take “whatever administrative action you deem appropriate.”

Double-dipping sheriffs, undersheriffs and chiefs

Guadagno was not the first New Jersey county sheriff to alter job titles to help a collect a new salary without giving up state pension checks.

In 1990, Essex County Sheriff Armando Fontoura hired John Dough -- a retired Newark deputy police chief -- to function as his sheriff’s officer chief. The sheriff altered the title to chief warrant officer, just as Guadagno did for Donovan in 2008.

The PFRS memo to the attorney general cited a 2011 New Jersey Watchdog investigation that found:

Dough currently receives $200,228 a year from public coffers -- $121,861 in salary plus $78,367 from pension. A revised webpage now lists Dough as “chief warrant officer” instead of sheriff’s officer chief.

In Union County, the late Sheriff Ralph Froehlich hired Harold Gibson -- a retired county public safety director -- as his sheriff’s officer chief in 2008. As a result, Gibson started collecting $195,301 a year -- $122,995 in salary plus $72,306 from pension.

After Gibson’s pension eligibility was questioned by the PFRS board in 2011, Union County changed his title to “clerk to constitutional officer.” By early 2012, Gibson had left the payroll, according to county records.

In Monmouth County, Sheriff Shaun Golden, Guadagno’s successor, changed Donovan’s job to undersheriff -- a position that allows him to legally receive both his PFRS pension, now $86,047 a year, as well as a county salary that has risen to $99,506 a year.

Throughout New Jersey, sheriff’s offices have been a hotbed of questionable pension practices. Most are legal because of loopholes in the pension law.

Sheriffs in 16 of the state’s 21 counties are double-dippers. The sheriffs also employ 37 undersheriffs who returned to work after retiring as local, county, or state law-enforcement officials at relatively young ages.

In total, the 53 officers collect nearly $10 million a year from public coffers -- $5.7 million in salaries plus $4.1 million in retirement pay.

Fontoura of Essex County is the dean of double-dipping sheriffs. During the past 25 years, he has collected $1.35 million in retirement cash without ever giving up his full-time county paycheck.

On Friday, August 31, 1990, Fontoura retired as county undersheriff at age 47. The following Monday, he returned to work with the same salary and duties, but a different title -- sheriff’s officer chief. One year later, he took charge as sheriff, a post he’s held ever since.

He currently draws $207,289 a year from public coffers -- $144,896 in salary plus $62,393 from pension as a retiree of his own office.

“Legal or not, it’s an outrage, and a slap in the face to every taxpayer in the state,” said Sen. Jennifer Beck (R-Red Bank). “Retirement income should not be collected until you’re not working anymore – that’s the premise of a pension -- and the fact that public employees exploit it is unconscionable. Worst of all, they brazenly brag about it.”

A bill cosponsored by Beck would stop most double-dipping. It would suspend pension payments to retirees who return to public jobs paying more than $15,000 a year. The retirement benefits would resume when they permanently leave public employment.

The proposed reform has gone nowhere since it was first introduced in 2011 by Beck. Its current incarnations -- S-883 and A-114 -- are trapped in legislative committees, unable to find enough support to reach the Senate or Assembly floors for votes before the session ends next week.

Fontoura now says he opposes double-dipping loopholes, but has not offered to give any money back to taxpayers or the pension system.

“Obviously, the loophole shouldn’t exist,” the Essex County sheriff told the Star-Ledger editorial board in September. “And I support the efforts to eliminate it.”

Mark Lagerkvist is a veteran investigative reporter who previously worked for CNBC, News 12, Asbury Park Press, New Jersey Watchdog, and other news outlets. His work has won more than 60 journalism awards, including honors from National Press Club, Scripps Howard Foundation, and Investigative Reporters & Editors (IRE). He can be reached at Mark@Lagerkvist.net

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