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Verbatim 2005 COMMENTS MADE BY MICHAEL OSBORNE, DURING PUBLIC AUDIENCE, AT THE CITY COMMISSION MEETING HELD ON NOVEMBER 15, 2005. Prepared at the request at James Cherat, City Attorney Mike Osborne: My name is Mike Osborne 3712 Coelbs Avenue, Boynton Beach, Florida. I'd like to hand these out to you, if I may. I'd also like to apologize that my color ran out of my printer at home so these are in black and white. But, I do have a copy here that is the pictures that I took to bring in and show. Hurricane Wilma was a test to the water plant. We came close to losing it but we did keep up and stay running. But, over the last few years there have been a lot of problems at the water plant and we've had citizen awareness days where we have given people an overview of how the water is made and how we are so proud of keeping it running during any storm that has come. But there was a 21 month period that we were without a director. We had an interim director. It was Caldwell and Brown as a matter of fact, Nem Gomez. He never really made any decisions to help us out, this, that and the other. We brought many of this stuff to the City Manager's attention. He wouldn't meet with us. He didn't want to handle it. He said he was taking care of it and finally 21 months later we got Mr. Boateng, which I really do appreciate because he has helped me out a lot. If you look at this, the first page, these are drainage pipes in the ceiling of our water treatment plant. You got to remember our water treatment plant was built back in the 60's and all this stuff is old. All these things leak. They leak rain water coming off the roof during the storms. We patch them up the best we can and go on. Second page are all floor drains that have been all filled with cement. The reason being, these floor drains seep out sewage gases during the day when the building is closed up, fans are turned on, it sucks sewer gases up cause all these pipes are old and stuff. They go from one drain to the next and fill it in with cement rather than call somebody in to take care of the problem. This has been an ongoing problem for two years. This is another thing we have tried to bring to Mr. Bressner's attention and never been able to get a sit down meeting with him. The third page shows the women's locker room which is actually a unisex bathroom now. Reason being because on the fourth page you will see the men's locker room and the bottom of the picture is one of our shower stalls that backs up and floods out anytime somebody uses it. This is the same one we were using while manning the plant during the storm. The picture in the middle shows our urinal, our toilet and our sink were taken out so they could be plugged up so that sewer gases wouldn't escape through this bathroom. That is why we share a bathroom with the ladies' locker room. The next page is pictures of equipment that I have been trying to get replaced seems I can't get parts for the east water treatment plant, I have been trying to get replaced for the last few years. But, without a director until this year, half way through the last budget year, it has been hard to get anything done. If you will notice, this middle picture is our chlorine system and it is completely outdated. And, we did have it in the works to have it all replaced and go to a liquid system and a week 1 Verbatim Excerpt - Mike vsborne Regular Commission Meeting November 15, 2005 before the project was suppose to start it got squashed. The next page is a couple of our chemical tanks. And, these chemical tanks have been leaking, one has been leaking since it was installed, but the fluoride system it seeps through. They had a company come in and try to repair it and it doesn't get repaired. But, we keep up with it. We do the best we can with it and we stay on top of it along with manning storms and day to day routine work. Other one is for our chlorine scrubber which is a caustic tank and it's been leaking and I've been asking to get it replaced for about five years now. The next picture is a picture of Hurricane Frances aftermath. This is one of our control panels for one of our high service pumps. During Hurricane Frances last year it actually caught fire and somehow or another didn't make it into the report to get replaced by insurance. My boss ended up having to put it in a, like $30,000 bucket to get replaced. He has had to put it in for this year's budget because somehow it slipped through the cracks last year. The next picture, is a picture of one of our filters. This filter was out of service for 18 months during that 21 month period that we didn't have a director in Utilities. And it was all due to this bottom picture of a $300 valve. A $300 valve kept this piece of equipment out of service for 18 to 21 months. There again, the last picture, is a picture I took after the hurricane and you can see the damage done to this building when you look at the top picture. But this is a piece of equipment is a dryer press for drying our sludge. We have been so short staffed this hasn't actually been in operation for over three years because we have been so short staffed. We are three people short again at the east water treatment plant and we are another person short again at the west water treatment plant. But, this piece of equipment here saves millions of gallons of water a year from being just left to go out into a lagoon and drained back into the ground. This is water that we pumped in, we've treated, they have blown off to blow off our waste and by using this piece of equipment we actually take the waste out of it and the water gets saved and reused. But, seems this has been out of service for three years we have lost millions and millions of gallons of water and millions and millions of dollars in money. These are some of the things that we put up with at the east water treatment plant. I know I've been up here many times in the past few weeks complaining and I'm hoping if I keep coming and I keep bringing things in, that maybe somebody will sit back and realize that you got good employees here. They rise to the occasion. They do their best with what they have to work with. We've got a lot of handicaps out there and granted Mr. Boateng is making it a lot easier on me along with my new supervisor that just came in a couple months after him. And we are starting to get some of this stuff replaced. But this went on for 21 months in the Utilities Department. Mr. Bressner was aware of it. He felt that the people they had there was incompetent yet he took him 21 months to get somebody in. In that 21 months we had directors, deputy directors retire. One of our deputy directors retired, before he retired obtained a job with Caldwell and Brown which this City still uses. And, the one who has done the report on how to change and add more supervisors and take away more workers in the utility department. We are going to end up here soon, if we keep going with all these consultants and all these people running our departments rather than have qualified people in here running our departments and qualified people in here working - we are going to end up with a whole City full of supervisors and no workers left to do the work. 2 Verbatim Excerpt - Mike ""sborne Regular Commission Meeting November 15, 2005 Thank you. Commissioner Ensler: Mr. Mayor, I'd like to ask Mr. Osborne some questions if I may. Mayor Taylor: Okay. Commissioner Ensler: First of all, are you a supervisor? Mr. Osborne: No, sir. Commissioner Ensler: Do you have a supervisor? Mr. Osborne: Yes, sir. Commissioner Ensler: Did you request these parts? Mr. Osborne: I've had three supervisors in the last two years. Commissioner Ensler: Have they forwarded on a requisition to buy any of these parts. Mr. Osborne: It was all put in the budget for the last couple years, a lot of these parts and were cut out at the City Manager's level. Commissioner Ensler: That's not my question. My question is was there a requisition forwarded to buy the parts? Mr. Osborne: Some of the parts there has been requisitions forwarded and completed now, but not all of them. He's still working on them. They are going to be - they started in this October's budget. Commissioner Ensler: I'm not talking about the budget. There is always money in the budget. When we have an emergency in the City there is always money in there to buy whatever parts are needed to keep the facilities running. There's no question about that. What I don't understand is how the people who understand what the problems are didn't fill out requisitions. I've been in this business before. I know what's involved. I'm an engineer myself. And, I don't understand where the process fell down that people who had to fill out requisitions to buy parts didn't pass those requisitions on. I just believe, honestly believe, that those parts were needed and that was forwarded, those parts would have been bought so you can fix things. Mr. Osborne: Sir, I brought it up at many meetings. I brought it up at negotiations sessions. I brought it up in meetings with Human Resource Department. I brought it up in all kinds of meetings some of the things that we go on at the Utilities Department and I kept getting a blind eye. I got a blind eye all the way up through the City Manager's office. I couldn't get a meeting with him. He doesn't seem to like to meet with employees for some reason. 3 Verbatim Excerpt - Mike ysborne Regular Commission Meeting November 15, 2005 Commissioner Ensler: You are making this a political process when it is a simple thing to buy the parts you need. Mr. Osborne: It is not as simple as it looks, sir, I beg to differ. I have worked for the City for 17 % years and I've seen what it takes to get parts around here. I've done my best to get anything that can be bought on my credit card I go out and buy with my City credit card to make sure my equipment stays working. And all my equipment stays working and the proof is in the pudding, during Wilma, I didn't lose my plant. I even lost my main generator, but I had it up and running within 15 minutes. Commissioner McCray: Since we are directing comments to citizens as well as employees, Mr. Osborne, I would like to personally thank you for having the fortitude to come up here and letting us know what is going on here in this City. Sure, we have requisitions. I got a call the other day, it's on the agenda for me to approve something for $140,000 for trash debris. Sir, you should be commended to have guts to come up here and tell us what is going on. I'm like you, I've kind of had it too, sir. Thank you. Mr. Osborne: I would just like to make one last comment. Like I said, since Mr. Boateng has been here a lot of these issues are being addressed. But, what I'm saying is we went 21 months in Utilities and couldn't get no where. Mayor Taylor: Thank you. Transcribed by: C{,lfbU<J Iv I OJ. Y' cfJ K /Jrc .('3; AJl?r{. 4 VERBAnM TRANSCRIPT FROM BOARD OF TRUSTEES EMPLOYEES' PENSION PLAN QUARTERLY BOARD MEETING HELD ON FRIDAY, JUNE 3, 2005 (REQUESTED BY CITY MANAGER BRESSNER) IV. Financial Reports- D) Benchmark Financial Services - Edward "Ted" Siedle, President - Report on Pension Consulting Kurt Bressner: Mr. Siedle, Mr. Robins is here also from Merrill Lynch and requested an opportunity to talk regarding your presentation. Do you want me to flip a coin and see who goes first or how do you want to handle this? Edward Siedle: I would prefer if he went first. Richard Robins: It is his presentation, I would like if he went first and I could respond. Kurt Bressner: All right, you are up first then Mr. Siedle. Edward Siedle: Before I start I want to be clear. You are not with Merrill Lynch, is that correct. Richard Robins: I'm sorry; I did not realize we were going to be cross- examined here. Edward Siedle: No, I just want for the record to be clear whether you are with Merrill Lynch or not. Richard Robins: I am with an outside law firm. Edward Siedle: And what firm is that? Richard Robins: Sutherland Asbill and Brennan. Edward Siedle: So you are here to represent your client. Richard Robins: Absolutely. Kurt Bressner: Now that you have gotten those questions done, if you have any other questions you direct them through me, okay. Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 Edward Siedle: Okay. Kurt Bressner: Anybody in the audience, so if you please direct your questions through me. Edward Siedle: Sure. Kurt Bressner: Thank you. Edward Siedle: We have been through this before at the Lake Worth Board Meeting, and that is why I want to make sure that - in that context we were not given an opportunity for rebuttal, and we also raised subsequent to the meeting - that to clarify what firm he was with and wasn't with. I want to hand you some additional materials. My name is Edward Siedle and I am President of Benchmark Financial Services, and we investigate wrongdoing involving money managers, pension and consultants, brokers, and others. I have been called the Pension Detective, the Sam Spade of Money Management. I have been doing this work since I began at the Securities Exchange Commission in 1983, and have generated quite a bit of press coverage for the work that we have been doing, combating pension consultant wrongdoing. The pension consulting industry has had elements of wrongdoing in it for a long period of time and it's been pervasive. We've been investigating pension consultant cases since 1996. And as the Plansponsor and Forbes articles indicate, this one "A Bribe By Any Other Name" and "Show Me The Money", we initiated the earliest investigations in this area on behalf of the $1.6 billion dollar City of Nashville Pension Fund and also on behalf of the City of Chattanooga Pension Fund. In December 2003, the Securities and Exchange Commission and the Department of Labor asked for our assistance in developing standards for pension consultant disclosure. Up until that point there were no standards. May 16th, just last month, the SEC announced the findings of its investigation. I provided you all with the staff report on that, and the SEC's findings were that disclosure of conflicts of interest, hidden financial arrangements, and other wrongdoing was pervasive, and that the disclosure provided by the consulting community was abysmal, in their own words. Subsequent to that on June 1st, the SEC and the Department of Labor, jointly issued (which I just handed you today), guidelines for pension funds to use in investigating or their due diligence of the pension consultants that they use. 2 Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 The implication of these standards for Florida public funds is significant. Here in the state, we have over 100 funds that are advised by broker consultants that are subject to significant conflicts of interest that cause massive harm to the taxpayers of this State. So I reported in the New York Times and elsewhere it costs the taxpayers of this state hundreds of millions of dollars. The wrongdoing will not continue to be concealed indefinitely, it is just a question of time. We are doing an investigation now on behalf of the City of Delray Beach Police and Fire Pension Fund, and we are in discussions with many other pension funds around the State about investigating these conflicts. One thing that is abundantly clear at this point, from the SEC and the Department of Labor, is that pension consultants are fiduciaries. The broker consultants in this State generally have resisted inclusion of language in their contracts indicating that they are fiduciaries. Some of the contracts may have that in it. I have not seen your contract, indeed I didn't even know who your consultant was until I walked into this room. But this is a significant development for the SEC and the Department of Labor to come out and say while consultants may attempt to dOdge fiduciary responsibility, they are fiduciaries. What does that mean? That means that they have to disclose any kickbacks they are receiving, any hidden financial arrangements, any compensation, anything that might in any way impair their ability to provide you with objective advice, and anything that may result in their putting their interest ahead of your own. That is what's critical, these conflicts be adequately disclosed or eliminated. The typical broker consultant's strategy employed in this state and elsewhere, is to offer the fund a low hard dollar fee of $15,000, $25,000, whatever; then to recommend to you - don't pay it in cash, pay me through brOkerage. Let your money managers do trades, which they are going to have to do anyway, and we will earn our fee from that. We would give you a 2-1 ratio. We would give you a 500/0 credit, that's the industry standard. That is not the industry standard. The industry standard is far closer to 70% or 750/0 even. The result of telling you to pay the fee through brokerage commissions at 2-1, is that the fee doubles. Instead of paying me 25,000 in dollars, you are paying $50,000 in commissions. That is bad enough, but it gets far worse, because the money managers that are selected are managers who have agreed to trade with the broker consultant, 1000/0 of their trades, 90% whatever. There are also money managers that have high portfolio turnovers. They trade a lot. You don't have index managers being recommended, you don't have low turnover managers being recommended, you don't have as much fixed income being recommended. And managers, who should have been fired years ago for dismal performance, continue on year after year, even though they are in the bottom 10% of their performance or peer group. 3 'verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 The failure to disclose the conflicts of interest when this pay me through brokerage arrangement is established, is significant because you don't realize that by entering into this compensation arrangement, the integrity of the advice you are getting has been utterly devastated. So the failure to disclose the total sources of compensation derived from the money managers is also a big issue. You will never know how much money your consultant has made from your account. And you won't know it because a lot of the stuff doesn't show up on your custody statement, and it doesn't show up anywhere else. It could be a hidden financial arrangement, or it can be simply hand in cash. It can be the imputed commission on a bond trade. You don't know what you are paying on your bond trades. It could be the imputed commission on an equity trade. None of these things are being disclosed to you. You have looked on my outline on item 8; the total compensation your consultant may be making off your fund can include many of these elements. Commissions on the obvious commission on trade; the implied commission; or the hidden commission on fixed income and net trades; revenue sharing fees, finders fees, conference fees, consulting fees to managers; that's where the consultant says that he will help the manager learn how to market effectively to pension funds such as yours and then collects a fee from the manager for helping introduce you to him and vice versa. As I note here on the outline, your custodial statements will not show all trading commissions, so don't be fooled for a minute to thinking that you are seeing all the compensation. The investigations we've undertaken around the world from Guam to Bermuda have shown that consultants could make 10 times the amount of the fee that you believe they are earning, the expressly stated fee. The result is that the total compensation derived by the consultant is never fully disclosed and the fund pays a much higher consulting fee than it otherwise would have to pay. The other result is that the managers are selected on a willingness to pay versus who is best for the fund. That ends up costing the fund millions. The brokerage commissions that you pay are higher. They shouldn't be six cents, they shouldn't be five cents, they should be three cents, two cents. There are ways of cutting your costs on the commission side that aren't being followed. Your money manager fees are higher than they should be, without even looking at yours, I could tell you that I suspect they are higher than they should be. Due to pension consulting skimming, taxpayers are forced to contribute a lot more to pension funds. The taxpayers in the City of Boynton Beach, they very likely could be contributing more to this pension fund because the pension fund has leaks. If you look at the cartoon that I passed out, it is from Pensions and Investments, the current edition. It's a leaky bucket, and what's causing the leak pension consultant conflicts of interest. These conflicts are real, they are 4 , Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 quantifiable, and they are pervasive throughout the State of Florida, and they are costing the taxpayers hundreds of millions of dollars. My final note here is, we will do an investigation for you; we will do a preliminary review at no cost. There is no time commitment from your staff. All you have to do is give us the documents. If there is any wrongdoing, if there are any hidden fees, if there are any kickbacks, finder's fees on mutual fund trades, whatever, we will recover them for you and be paid a percentage of the recovery; whatever that might be. That would be something that we would discuss after we've done our investigation if you want. So in summary, there is noting to lose here. Your fiduciaries, you're on notice from the Department of Labor and Securities Exchange Commission, these conflicts are pervasive and they must be investigated. If I am wrong, what have you lost nothing. I have wasted my time and none of your time has been wasted. If I am right, you have done your fiduciary duty, and the monies that the taxpayers in this town are putting into this penSion fund will be recovered. As we said in Lake Worth, and I am going to say it here again, Merrill Lynch should welcome this investigation. The best thing that could happen, given the articles in Dow Jones and elsewhere about Merrill and the other brokers in this State, would be to have an investigation done and have me turn up nothing. I can't conceive of a reason to oppose this investigation. That is my case that I have stated before you, if you have any questions, I would be happy to answer them. Jim McIntyre: What is the percentage? Edward Siedle: The percentage would drift down from 300/0. A maximum of 30% depending on how much money, to possibly 150/0. That would be negotiated with you. The initial step would be to simply do the investigation. There would be no contract related to the investigation. Simply give me the books. I could get the books from you now, under the Freedom Information Act of this State, and do my investigation and present it to you. I am not going to do that because I am not going to invest my time unless you are invested in it with me - unless you care, and unless if I find something you are going to do something about it. But there doesn't need to be any contract initially, just give me the documents, give me your Board approval to do the investigation. Then we'll present the findings, say here is what we think the damages are and we could negotiate a recovery agreement. Kurt Bressner: How long does it normally take you to conclude a review? 5 Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 Edward Siedle: The initial review could be completed within a month. It largely depends on how expeditiously you get me the documents. If you give me the documents today, we could probably have it done in two weeks. That seldom happens. Kurt Bressner: Typically what documents do you require to conduct your review? Edward Siedle: Typically what we require is a copy of the contract that you have with Merrill Lynch and any other subsequent contracts. The initial contract and any other subsequent contracts, your quarterly performance reviews prepared by Merrill Lynch, and that at the outset is pretty much all we need. We may need custody records, but initially it's just the contracts and the quarterly reports. The contracts and the quarterly reports would tell us a lot that we need to know. Kurt Bressner: Any other questions from members of the Board? Okay, thank you. Mr. Robins, and then Mr. Siedle if you would like to comment following Mr. Robins' presentation, that would be fine. Edward Siedle: Thank you. Richard Robins: Thank you, I am Richard Robins with Sutherland Asville and Brannon in Atlanta, Georgia and I appreciate you accommodating my schedule. I do represent Merrill Lynch and our law firm represents Merrill Lynch in Georgia and in Florida. We do not welcome any investigation by Mr. Siedle. Mr. Siedle has already tried and convicted Merrill Lynch of wrongdoing publicly and then now he comes in and says; now that I have convicted Merrill Lynch, let me do the trial. We are offended by that concept. Mr. Siedle just got through saying if you care you will hire me. What he essentially is saying is, if you don't hire me, it shows you don't care. You aren't doing your fiduciary duty. We find that offensive as well. This idea of an investigation that he could get from public records, I am confused, because the December 15, 2004 Boynton Times, Mr. Siedle was quoted at length, and it said "the City's pension is one of about a dozen local penSions recently reviewed by the Benchmark Companies". He is reporting back in December that he reviewed your records. So I don't understand why he can't come in here and offer you any evidence of wrongdoing by Merrill Lynch at all. And you did not hear and will not hear any evidence of wrongdoing because there is none. What is the plan? Well what he does is he deals with the press and gets a story on a public pension, people trying to do their job, and put them on the defensive, suggesting that if they don't hire him they are doing something 6 Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 wrong. What does he say about Merrill Lynch, and this is before he has done any investigation, and I am reading the Boynton article, quotes from him, "The artful way these consultants have of hiding poor performance, fraudulent practices, City Auditors might not know about. These financial consultants are not working for the best interest of their clients. They are giving advice that is corrupted by conflicts of interest. Kickbacks are part of the problem." That's what Mr. Siedle said before he's done any investigation. It is no wonder we don't want to have anything to do with him. In terms of what we welcome, we do welcome answering the questions. The SEC has come up with questions that they suggest fiduciaries respond to. We have no problem on that. I have done so in writing. Merrill Lynch has done so in writing. We have told you we do not engage in the types of practices he is alleging that somebody may have engaged in somewhere from Guam to Bermuda, but not here. If your counselor your financial consultants wish to ask us further questions, or wish to talk to us and review our books, we have no problem with that. What we have a problem with is dealing with somebody who has accused us of fraud, kickbacks, etc, etc, and not have a bit of evidence to offer. Mr. Siedle referred to his track record; well let me tell you his track record. In Lake Worth, we had not one but we had two meetings. He and I were both at the first meeting and had the opportunity to speak. The second meeting, we were invited again. I showed up, Merrill Lynch is committed to it - it stands behind what it has performed. Mr. Siedle wasn't there. Lake Worth decided not to have anything to do with Mr. Siedle. The Chicago Teachers' Fund is another one where he made an unsolicited offer to investigate, and they said no. As far as we know, no pension plan in Florida has retained him to investigate Merrill Lynch. In fact, this is the only second plan I am aware of that has allowed him to make a presentation. He mentioned that he was retained by City of Delray Beach, well that's an interesting one, you might comment on this; Merrill Lynch doesn't do any work with Delray Beach - that was Smith Barney, it wasn't Merrill Lynch. And my understanding is that after receiving Mr. Siedle's report, the City of Delray Beach did not find it particularly useful and went no further. But that didn't involve Merrill Lynch and no one has retained Mr. Siedle for this investigation. As I said, we have no problem with any inquiries you wish to make, you have very good counsel, you have very good financial advisors. And, we will answer any questions you have. We have stated in writing unequivocally, that we have not engaged in the kind of conduct Mr. Siedle alleges. What we do have a problem with is being involved in any investigation by somebody who has accused us of these terrible misdeeds without any support whatsoever. So we 7 'verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 would respectfully request that you not retain Mr. Siedle. There is nothing to keep him from looking at your public records and coming in here with hard concrete evidence as opposed to just innuendo. Nothing preventing him from doing that. And we are happy to cooperate with you directly with your counsel or anyone else who is truly independent and unbiased. Are there any questions? Kurt Bressner: Any questions from members of the Board? Okay, thank you Mr. Robins. Richard Robins: Thank you. Kurt Bressner: Mr. Siedle. Edward Siedle: I find it ironic that the United States Senate Banking Committee asked me to testify about wrongdoing in the mutual fund industry since I am such a gad fly that doesn't know what he is talking about. I also find it ironic that the Louisiana House of Representatives Retirement Committee asked me to testify about pension consultant conflicts of interest and enacted the first law to require consultants in the State to disclose conflicts of interest. Again, apparently I know nothing about what I am talking about. Let's talk about my track record. The investigations I undertook in Nashville, in Chattanooga, were of UBS, not Merrill Lynch. The investigation that this little man has mischaracterized which is continuing in Delray at the request of the City of Delray, you could call Chief Bill Adams there and ask him himself; is of Smith Barney. My comments in the press regarding Boynton Beach were not necessarily directed at Merrill Lynch. You have Smith Barney in this City too. I am not out on any campaign against Merrill Lynch. What I am seeking to do is to get attention drawn to the significant harm being caused by penSion consultant conflicts of interest. These conflicts that I am alleging here are in the SEe's report. The SEC came to us, to my firm, to me, for guidance on how to approach the industry. Do they do that regUlarly? I don't think so. It's an extreme honor to me, to be asked by the Department of Labor and the SEC to provide guidance on those matters. As far as a second meeting in Lake Worth, my office is in Lake Worth, I was never advised of any second meeting in Lake Worth to attend. But I would love to see any evidence that I was. Again, that is just a flat lie. Had I been invited to go there, obviously I would have gone there. So once again, the investigation that we do will be correct based upon the facts. I have no interest in going after Merrill Lynch any more than I did with UBS or Smith Barney or in the case of Chicago Teachers; we are talking about Mercer, a 8 Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3,2005 unit of Marsh. It doesn't matter to me who the identity of the consultant is; what matters to me is that pension funds stop being harmed by hidden financial arrangements. Thank you. Kurt Bressner: Thank you. Okay, I basically heard three proposals today. The first proposal is the proposal that was presented to us by Mr. Siedle, offering his services to review our pension fund money manager's performance as well as to review the documents. The second offer was that in conjunction with recently received guidelines from the SEC that were dated June 1, 2005, that Merrill Lynch would respond to the elements of this newly released check list. And the third option is the do nothing option, and to basically not proceed with either of the first two options, and either await the results of other inquires or stand pat with our current situation. So as I see it, those are the three alternatives that potentially this Board has to consider. Carisse LeJeune: Excuse Mr. Chairman, may I ask a question of Mr. Bill Mummert, our Finance Director, who is in the audience. Kurt Bressner: Sure, Mr. Mummert, come on up to the podium. Carisse LeJeune: Mr. Mummert, who audits our pension funds for the City? Bill Mummert: The General Employee Fund is part of the City's audit, which is done by Caler, Donten and Levine. The other two funds are audited by firms separate from Caler, Donten. There are auditors that are hired by the separate pension funds. Carisse LeJeune: Would they or have they found the type of practices that Mr. Siedle is referring to, as far as conflict of interest and all the other items that he has referred to. Bill Mummert: To the best of my knowledge, no. To be honest with you though, I am not sure about the depthS of the audit procedures that they would apply when they do their audits. I can't really speak on their behalf as far as how greatly they delve into them. But as far as I know, there have been no management letter comments specifically related to the performances of Merrill Lynch. Carisse LeJeune: And as a Finance Director Sir, do you have confidence in the auditors that the City has hired? Bill Mummert: Oh, absolutely. 9 . Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 Carisse LeJeune: Thank you sir. Jim MacIntyre: Would it be possible to ask them what depth they do investigate our pension funds to see if they do cover this type of situation. Would they uncover this if it was there? Bill Mummert: I can certainly check with Caler, Donten and Levine because we've just completed the audit for September, 2004. I am not even sure who the auditors are that represent the other two pension funds. We do have their financial statements, so I can certainly based on the financial statements, get in contact with those particular firms, and ask them that question if that is the direction of the Board. Jim MacIntyre: Well I believe if they aren't doing that, then they aren't doing their job. That would be a part of an audit right, to find out if there are any improper practices going on in the pension. That is why we would have an audit, and pay for one. Bill Mummert: Once again, I would have to clarify with them the depths of exactly what they are doing. Are they mainly, you know they are doing a financial audit. So what they're trying to do is justify the numbers that are being reported in the financial statement. As far as taking a look at the performance of Merrill Lynch, once again I am not sure. I think there are probably taking a look at the investment statements, they are trying to determine if the earnings that are being derived seem to be sufficient based on the funds that are available. If the fund was constantly losing money in a market that was on the upward swing, they may raise an issue about it. But I think really they are looking at internal controls and they are really just auditing the financial statements. They are auditing the numbers. Kurt Bressner: Their responsibility is to really look at the financials, and not necessarily the performance. But as Mr. Mummert indicated, my experience has been that in any fund if there is anything that seems to be out of sync with normal, the auditors do bring it to our attention, whether it is a fund balance that is diminishing to a dangerous level. In my experience, I have seen a pension audit where there were some investment issues that they just brought it to the attention that the investment earnings seemed to be low, but that was really an atypical comment for an audit from our financial audit. It is not their purview or their domain, nor do I believe that they look at the contract that we have with the money managers as part of their responsibility. Any other questions of the Board? 10 . Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 Okay, there are three options basically that I have offered to you just as a way to facilitate the conversation here, and there is a fourth option here. Well the fourth option would be to table the item, so that would be similar to the do nothing option I suspect. But nevertheless, that is always the option as well. In line with Jim's comments about the audit, are you satisfied as far as, do you feel you need any information from the auditors, or Ca ri sse, from the auditors relative to having them review this matter further? Carisse LeJeune: The auditors that we now employ to do our general pension fund audit, would they be qualified to do that type of review, or is that beyond their purview? Bill Mummert: Once again, I would have to check with them. My guess is that it is probably outside their scope. Kurt Bressner: You would need to come up to the microphone again. For the record, you need to come up to the microphone, Bill. Start over please. Bill Mummert: They are really just conducting, as I said before, they're conducting an audit of the financial statements. It is up to them to issue an opinion on those statements, and make sure that those numbers are accurate. As far as getting into an audit of the investment advisors of the fund, I would have to check with them and see if that is part of, or if that is an audit that they would be willing to do, or have done in the past. I don't think, once again, that it is part of their normal scope of a financial audit. I can easily check with Caler, Donten and Levine who have just completed our audit, and my guess is if either something that they normally do, then it's something that the other auditors normally do as well, who are handling the other two funds. Kurt Bressner: That emerges as option two and a half. Carisse LeJeune: Well as a trustee, I would be satisfied for Mr. Mummert to check and see if our auditors do that type of review. Also, given the new information from the SEC, which Merrill Lynch said that they would be happy to answer these questions. If they do answer these in entirety, in a written document, lawfully signed, I would like to review that document before I make any decision on whether or not to hire Mr. Siedle. Kurt Bressner: Okay, is that in the form of a motion? Carisse LeJeune: I would be happy to make a motion. I would like to make a motion for Merrill Lynch to provide us in writing lawfully signed by an executive of their company, to answer these questions of the Security Exchange 11 .Verbatim Transcript Board of Trustees Employees' Pension Plan Boynton Beach, Florida June 3, 2005 Commission that we have been given today; and to table making any type of decision on Mr. Siedle's proposal until we have an opportunity to review that document. Kurt Bressner: Okay, is there a second to that motion? Jim MacIntyre: I second that motion. Kurt Bressner: Okay, any further questions on the item before us? Is there any interest, and just for purposes of discussion, is there interest in having our auditors involved with any of this at this point? Carisse LeJeune: Just for Mr. Mummert to informally check with auditors to see if they do that type. Kurt Bressner: Okay. Julie Klahr: One thing I would like to advise the Board is to the extent that you either retain the services of this auditor to conduct a further review if they are not already doing it, or any other auditor, or to have anybody else investigate, you would still need to go out through the RP process or a RQ process, a biding procurement process, rather than just hiring anyone individual. You currently have a relationship with an auditor that you could extend the contract if they chose, or indicated that they are not currently conducting such an audit, but indicated that they could. If you wanted to extend that contract in some fashion, you could because you currently have that relationship. But anything other than that, you would need to go through a proper procurement process. Carisse LeJeune: That's very good advice, thank you very much Julie. Kurt Bressner: Okay there is a motion and a second on the floor. Any other questions on the matter? All those in favor, aye. Opposed, none. Okay that is the way we would precede at this point. Thank you very much. Respectfully submitted, /) /\{ . ()rAlk~/~ Catherine Wharton (Recording Secretary) June 8, 2005 12 COMMENTS MADE BY MIKE FITZPATRICK, ALTERNATE BOARD MEMBER ON THE PLANNING AND DEVELOPMENT BOARD, AT THE MARCH 22, 2005 MEETING REGARDING QUANTUM PARK ITEM MU HEIGHT (CDRV 05-006) Prepared at the Request of City Manager, Kurt Bressner Comments by Alternate Board Member, Mike Fitzpatrick: Mr. Fitzpatrick: Mr. Fitzpatrick: Mr. Fitzpatrick: What bothers me about this is the cherry picking. There is this Suburban Mixed Use height and there are certain regulations and certain things that go into Suburban Mixed Use and one of them is open space. Now what that exactly means, I am not sure because apparently concrete patios equal open space. In part of this packet it says Quantum states that "an increase in height will encourage the conservation of natural amenities by accomplishing the vested development intensities in a vertical manner in contrast to the land sprawl of lower height development. " Okay, that sounds good, where in their request for the height changes are they putting in any extra open space. They are not. So, what they are doing they are cherry picking from the Suburban Mixed Use, getting what they want and then discarding anything that they regard as an impediment. So, if they want the Suburban Mixed Use height, they should rezone this to Suburban Mixed Use and go that route, instead of just mudding the waters for the heights. As Shirley Jaskiewicz pointed out, this is going to apply throughout the rest of the City, so who knows where this is going to end up or pop up again like a cancer. So, if they want the Suburban Mixed Use height, this would be a Suburban Mixed Use designation for the acreage they are interested in. Thank you. So I encourage the Board to vote it down. Transcribed by: . ~<A-- fh - III tLLA\. Barbara M. Madden Recording Secretary (April 19, 2005)