CHICAGO -- Members of Detroit's two pension systems and Wayne County's retirement fund have sued the systems' actuarial firm, alleging that consultants used faulty assumptions that contributed to underfunding that some say helped drive the city into bankruptcy.
Detroit retiree Colleta Estes filed a lawsuit in Wayne County Circuit Court accusing the city's long-time actuary, Gabriel Roeder Smith & Company, of using a misleading methodology to calculate contributions, and of allowing trustees to spend money they didn't have, according to a report in the New York Times Dealbook section.
Members of the Detroit police and fire retirement system have filed a similar lawsuit as have members of the Wayne County employees' fund, according to the Times .
Estes accuses Gabriel Roeder, which provided calculations and analysis to pension trustees, of covering up shortfalls and helping trustees overseeing the general employee fund spend money to further their self-interest. The lawsuit asks to have the pension plan made whole.
Gabriel Roeder responded by calling the firms "factually, legally and procedurally infirm," and said they "reflect a gross misunderstanding of the nature of actuarial services," the Times said.
One of the problems is that Gabriel Roeder, like many actuaries, assumed for years that the city's payroll was growing when in fact it was shrinking.
The firm still works with the city's two pension funds.
