Judge Strikes Part of Providence, R.I. Suit against Buck Consultants

A federal judge dismissed part of a lawsuit Providence, R.I., filed against its longtime actuary Buck Consultants over an accounting error that officials said cost the city $10.8 million.

Providence filed the suit in February, alleging breach of contract, breach of fiduciary duty, negligence and violation of Rhode Island’s False Claims Act after Buck officials admitted to misgauging $700,000 of savings Providence had expected to achieve this year by overhauling its pension-benefit plans for retired police officers and firefighters.

Judge William Smith of the U.S. District Court for Rhode Island rejected an appeal by New York-based Buck to toss the suit, but said the city had no legal basis under the false claims act.

City officials had asked Buck to calculate the savings that would result from a 10-year suspension of cost-of-living adjustments, or COLAs. Relying on Buck’s calculations, the city reached an agreement with unions and retirees that Mayor Angel Taveras said possibly saved the city from bankruptcy.

Taveras said that when compounded annually over 28 years, the error amounted to $10.8 million in today’s dollars.

“The services provided by Buck in the present case cannot be fairly characterized as worthless. Even if Buck erred in its calculations, it at least provided the city with a rough approximation of the savings that would be achieved by a ten-year suspension,” Smith wrote in his Aug. 9 ruling.

Buck, the city’s actuary since 1920, called for a full dismissal, saying Providence reached the agreement before Buck made the estimate in dispute, and that the city testified that it made the best deal it possibly could.

Smith, however, wouldn’t throw the case out.

“While the $10 million discrepancy constituted only a small percentage of the system’s total liabilities, that is not really the point. The city claims that the error was significant enough to affect its decision to enter into an agreement with its unions and retirees. This is sufficient to survive a motion to dismiss,” he wrote.

The lawsuit graphically described a Jan. 3 meeting between Providence and Buck officials, alleging that Buck employee Philip Bonanno, admitting his mistake, “could barely speak and choked out his words as he asked for a glass of water,” and said he might pass out.

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