Providence, R.I., on Tuesday sued its longtime actuary, Buck Consultants LLC, accusing the firm of miscalculating $700,000 of savings the Rhode Island capital expected to achieve through pension overhaul.
“When compounded annually over the next 28 years, the error amounts to $10.8 million in today’s dollars,” Mayor Angel Taveras said in a late-afternoon statement after the city filed the suit in U.S. District Court in Providence. “Buck’s mistake is inexcusable, and I will not allow Providence residents to pay for their mistake. Buck needs to make the city whole and we believe that after trial a jury will agree with the city.”
The city has retained Buck since 1920.
“We have yet to be served with a lawsuit, so it would be inappropriate for us to comment at this time," Buck senior marketing consultant Steven Laird said in a statement.
For the past two years, according to Taveras, the city has relied on Buck’s calculations to guide pension-overhaul efforts. The mayor said the city did not discover Buck’s error until late December, after it had reached a settlement with the city’s unions and retirees.
“We will not alter the settlement and or seek future concessions from Providence’s employees and retirees to achieve the lost $10 million,” Taveras added.
Providence, whose population is 178,000, seeks redress for breach of contract, breach of fiduciary duty, negligence, negligent misrepresentation, and treble damages and attorneys’ fees.
“When first confronted with the material errors, Buck admitted its mistakes and acknowledged responsibility for its carelessness,” the lawsuit said. “Thereafter, in a feeble attempt to explain the error away, Buck offered that it actually had committed numerous other undisclosed calculation errors that accounted for the lost savings, some of which had persisted for up to two decades.”
Pension reform in Rhode Island has generated national headlines. Late in 2011, Rhode Island passed a law overhauling benefits for state employees. Also that year, 19,000-population Central Falls filed for bankruptcy and while under Chapter 9 protection, reduced benefits for retired police officers and firefighters by up to 50%.
Earlier in 2012, Taveras called the city’s finances a “Category 5 hurricane.” Late in the year, though, the city worked out agreements with police officers, firefighters and retirees that Taveras said would reduce the unfunded liability by an estimated $200 million. Other moves such as a commitment of nearly $50 million from colleges and hospitals have the city within striking distance of a balanced budget, which Taveras hopes to realize by year’s end.
City solicitor Jeffrey Padwa, assistant city solicitor Kenneth Chiavarini and William Dolan from Brown Rudnuck LLP are representing Providence in the lawsuit against Buck.