Salem Joins Twelve Municipalities In Filing Formal Complaint with NH Bureau of Securities Regulation Re: LGC

The towns of Peterborough and Durham, acting through their Town Administrators Pam Brenner and Todd Selig, have raised concerns with about a dozen other municipalities who, like Peterborough and Durham, were members of the LGC during the time that surplus funds were accumulated in the Local Government Center (“LGC”) health insurance and property liability trusts and which are now subject to Donald E. Mitchell’s August 16, 2012 Order directing that more than $52 million in certain surplus funds from these trusts be returned to the then Trust members.  Peterborough and Durham were members of the LGC trusts for many years, leaving the LCG trusts on June 30, 2012.

The concerns raised by Peterborough and Durham are also shared by the towns of Auburn, Bennington, Canaan, Greenfield, Henniker, Lyndeborough, Northfield, Plainfield, Raymond and Temple. 

On Monday, December 10, 2012, the town of Salem contacted Peterborough and Durham and asked to join the request.

From communications that these municipalities have received, it is their understanding that the LGC has taken the position that in order for a municipality to be eligible for the return of its share of the Surplus, the municipality must have been enrolled in the specific coverage during the billing cycle when the surplus is proposed to be returned—an unspecified date in the future.  Under this analysis, neither Peterborough, Durham, nor Salem would be entitled to participate in the proposed return of Surplus. 

The LGC indicated in October 2012 that the “return” of Surplus would be in the form of a premium “contribution holiday”.  Until late in the day on Monday, December 10, 2012, it was the understanding of these communities that no actual funds were proposed to be returned.  The LGC announced on December 10th, possibly as a result of Peterborough and Durham's filing with the NH Bureau of Securities Regulation, that member entities can now request a cash payment in writing.

While this proposal may address a non-cash credit of funds or a cash payment to municipalities that are current property liability and health insurance trust members, this proposal does nothing for those members who have left the LGC program, but whose contributions helped build the surplus over the time span that it was allowed to unlawfully accumulate.

NH RSA 5-B:5 requires that pooled risk management programs, such as the LGC, meet particular standards.  Included within these requirements is the obligation on the part of the program to return all earnings and surplus in excess of any amounts required for administrative claims, reserves, and purchase of excess insurance to the participating municipalities.  The standards further require that the program conduct an annual audit of financial transactions and an annual actuarial evaluation of the program.

The surplus in any particular year is due in part to the payments made by the participating municipalities in that particular year.  As detailed in the Mitchell report (see page 27 of the report) the determination of earnings and surplus of each trust was to be determined annually.  The present position of the LGC that it is only obligated to return Surplus to those municipalities who are presently within the applicable trust program unlawfully discriminates against former municipal members whose contributions help create the surplus. 

The proposed distribution of surplus may also create a windfall to the LGC.

Such funds would have been returned to the towns of Peterborough, Durham, Salem, and the other communities mentioned above, but for the LGC failing to perform annually its audit, actuarial and fiduciary responsibilities in accordance with law.

Ms. Brenner and Mr. Selig believe LGC’s refusal to return to Peterborough, Durham, and the other towns that have joined in this action their prorata share of the Surplus is improper and contrary to law. 

On behalf of Peterborough, Auburn, Bennington, Canaan, Durham, Greenfield, Henniker, Lyndeborough, Northfield, Plainfield, Raymond, Salem, and Temple, attorney John Ratigan from DTC Lawyers in Exeter has requested that the NH Bureau of Securities Regulation examine this issue immediately and take steps to ensure that a prorata distribution of Surplus proceeds be required, based upon the annual contributions of the members that contributed to the creation of this Surplus.

In accordance with RSA 5-B:5,I(d) and (f), attorney Ratigan has requested that he be provided a copy of the annual audit of financial transactions and actuarial evaluation prepared by the LGC and filed with the NH Bureau of Securities Regulation for the years 2010 and 2011.

A copy of attorney Ratigan's December 7, 2012 filing with the NH Bureau of Securities Regulation is attached to this release.