Towns of Durham, Northfield, Peterborough, and Salem NH
Coalition of Municipalities File Motion to Intervene with NH Supreme Court on Appeal of the Local Government Center, Inc. (LGC) CASE No. 2012-0729
Allege LGC Discriminatory Business Practices in Return of Ordered Surplus Funds
The Towns of Durham, Northfield, Peterborough, and Salem, NH, on behalf of a coalition of fourteen municipalities (Auburn, Bennington, Canaan, Durham, Greenfield, Henniker, Lyndeborough, Meredith, Northfield, Peterborough, Plainfield, Raymond, Salem and Temple), today have filed a motion to intervene in the Appeal of the Local Government Center, Inc. v. NH Bureau of Securities Regulation case presently before the NH Supreme Court.
The action marks an unfortunate turn of events in which municipal taxpayer funds are now being diverted to litigate the very organization charged with representing the interests of towns and cities across NH, as well as the public agency charged with regulating it.
The Bureau of Securities Regulation (BSR) found wrongdoing in the management of the Local Government Center’s risk pools. It ordered millions of dollars held by the Local Government Center (LGC) to be returned to current members of the pools.
Durham Administrator Todd Selig states, “The BSR, however, did not distinguish among members. Some joined the risk pools early or late, some left early or late, and some joined, left, and later rejoined. By ordering the money returned to current members, it created windfalls for some, but inadequate recompense for others. That is, some members will receive an arbitrarily larger share than their contribution, and some an arbitrarily smaller share.”
To fix this, the four towns have petitioned the NH Supreme Court to allow them to intervene, and to address the hearings officer’s failure to fashion a remedy that will allow refunds in proportion to members’ contributions. Due to the dates they joined and left, these four – Durham, Northfield, Peterborough, and Salem – believe they represent all members whose share of the refund will be inadequate compared to the share of the money they contributed.
LGC Case Background & Details on Coalition of Communities' Petition to NH Supreme Court
In the Order dated August 16, 2012, State of NH hearings officer Donald Mitchell found that the Local Government Center (LGC) had engaged in actions or inactions that resulted in multiple violations of RSA 5-B.
These statutory violations, which commenced in 2003 and continued through 2010, were attributable to, amongst other things, a failure by LGC to distribute to Trust members on an annual basis excess earnings and surplus, improper transfers of monies from the Health Care Trust and Property Liability Trust to the Workers Compensation Trust, and a transfer of the Health Care Trust’s and Property Liability Trust’s respective interests in real estate to the Local Government Center Real Estate Inc. without consideration.
Salem Town Manager Keith Hickey states, “In sum, the Order found that but for these illegal actions, there would have been additional excess earning and surplus that would be available to return to LCG members on an annual basis – members such as Durham, Northfield, Peterborough, and Salem.”
The Order: What The LGC Has To Pay Back
$33.2 million from HealthTrust
$17.1 million the Property-Liability pool siphoned from HealthTrust
$3.1 million from Property-Liability for communities that joined after June 14, 2010
Total: $53.4 million
As no agreement was presented to the hearings officer within 30 days of the Order as required, the LGC proposes to issue refunds to those who were members of its Health and Property Liability Trusts as of 8/16/12, the date of the Order.
Durham, Northfield, Peterborough, and Salem contend that such a refund would not meet the standard articulated in the Order that refunds shall be “in proportion to each member’s contributions to that standing amount of earnings and surplus.”
Durham Administrator Todd Selig states, “The return of tens of millions of dollars by the LGC to its members of the Health Trust and Property-Liability Trust programs is mandated by the hearing officer’s order to be in proportion to each member’s contributions. Durham, Northfield, Peterborough, Salem and other political subdivisions contributed to the surplus with taxpayer funds. Those funds should therefore be returned. It is an issue of basic fairness and equity -- no more, no less.”
Durham, Peterborough, Salem and many other political subdivisions would have been able to recoup a refund had its operative date been June 14, 2010 – the date set by the Order if the BSR and LGC reached an agreement.
Northfield and many other political subdivisions who left the LGC prior to June 14, 2010 would have been able to recoup a refund had the remedy required a re-calculation of surplus on an annual basis, with the surplus distributed annually, based on annual membership rolls and the premiums paid by members and former members each year.
The NH Supreme Court has equity jurisdiction to fashion a refund remedy that is in proportion to each member’s contributions to that standing amount of earnings and surplus.
Durham, Northfield, Peterborough, and Salem and scores of other political subdivisions across NH contributed to the creation of the illegal LGC surplus, but per the terms of the Order and the position taken by the LGC, they are not eligible to participate in the distribution of surplus because they terminated their Trust membership prior to 8/16/12.
Northfield Town Administrator Glenn Smith states, “The municipalities have requested the NH Supreme Court to determine an equitable approach to distributing the surplus generally requiring the LGC to calculate the amount of surplus that accrued each year from the year that the LGC first unlawfully retained excess surplus, and to allocate the surplus proportionally amongst the members of the Trusts by year.”
“Such an annual, proportional remedy calculation could be applied and would be equitable,” states Town Manager Hickey.
Peterborough Town Administrator Pam Brenner states, “The information provided by the LGC in response to Durham, Peterborough, and Salem’s RSA 91-A request reveals that in any given year, the membership of the Trusts changed. Awarding the refund based on the August 16, 2012 Order date does not capture accurately the amounts that Trust members contributed to the Trusts over the time that the surplus accrued.”
Selig states, “Public employees paid a significant portion of the health care premiums, and presumptively they will receive from their employers a corresponding portion of any health care surplus refund payment. The existence of such public employee health care premium contributions underscores the importance of achieving an accurate and equitable distribution of any Trust surplus. Only the NH Supreme Court can remedy the inherently inequitable situation at this juncture.”
Durham, Northfield, Peterborough, and Salem, as Intervenors, have requested of the NH Supreme Court that their Motion be granted, and that they be allowed to brief before the NH Supreme Court two issues:
1. Whether the hearings officer erred in failing to fashion a remedy that will allow that refunds shall be in proportion to each member’s and former member’s contributions to that standing surplus amount and earnings?
2. Whether the NH Supreme Court should exercise its equitable powers to fashion a remedy that the calculation and refund of any surplus shall be in proportion to each member’s or former member’s annual contribution to said illegal surplus, or such other equitable remedy as the Court shall see fit?
In December 2012, the towns of Auburn, Bennington, Canaan, Durham, Greenfield, Henniker, Lyndeborough, Meredith, Northfield, Peterborough, Plainfield, Raymond, Salem and Temple filed a formal complaint regarding LGC discriminatory business practices with the NH Bureau of Securities Regulation.
Subsequent to the filing with the BSR, the Bureau of Securities Regulation’s outside counsel, Andru Volinsky told Annmarie Timmins of the Concord Monitor, “The bureau will need to look at this…There is nothing in the law that says you have to be a member to get your surplus back.”
Town Administrator Pam Brenner states, “To date, the Towns have received no formal response from the BSR.”
The motion to intervene filed by Concord Appeals Attorney Joshua L. Gordon may be found on line at http://appealslawyer.net/do/briefs/Petition_to_Intervene_w_appx.pdf.