Judge Tells Government Lawyer Court Can’t Stop Pension Penalties

The GERS office on St. Thomas.
The GERS office on St. Thomas.

A lawyer representing the V.I. government asked a federal judge to waive penalties and interest owed to the Government Employees Retirement System. During a Tuesday morning hearing in District Court, the judge said the law does not allow him to do so.

The hearing was the latest development in a lawsuit filed by pension system officials in an attempt to get the government to pay employer contributions on behalf of government workers. Late last year the court determined the government owed $5 million to make up for contributions that were either incomplete or missing since 2012.

Now, with the help of an outside consulting firm, District Court Judge Curtis Gomez is trying to determine how much in penalties and interest must be paid in addition to the delinquent contributions. The figure could be up to twice the amount of the delinquent contributions, the judge told attorney Angel Taveras.

Gomez also cited statutes from the Virgin Islands Code that spell out payment of penalties and interest to the pension system. The only way the debtor could get relief is through the system’s executive director.

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“I don’t see any authority in all of the law that the Legislature passed that allows the court to do what you’re suggesting,” he said.

And, according to the law, the director can waive the penalties once a year, provided the debtor is facing extraordinary circumstances.

Taveras is an outside counsel from the Boston-based firm Greenberg Traurig. He argued that demanding payments from the government in addition to the $5 million presents a financial hardship.

That appeal did little to sway the judge. “Why would the court interpose that discretion and put itself in the shoes of the administrator?” Gomez said.

Consultant Chris Fitzgerald testified at the hearing on the efforts being made to determine the additional balance due. Fitzgerald manages financial investigations and dispute resolutions for RSM-US, LLP.

The witness told the court about the role he played in the analysis used to determine the amount of delinquent payments owed to GERS.

“Did your report address a specific amount for delinquent assessments?” the judge asked.

“Yes,” Fitzgerald said. From Jan. 1, 2010, to Dec. 31, 2018, the government owed $5,096,511.

Pension system attorney Robert Klausner questioned the method used to reach that sum.

If a different method was used, would the government’s bill for penalties and interest be more like $3, Klausner asked.

The witness said yes. Additional monies may be added if another provision in the law takes effect. That statute calls for application of additional fees on those delinquent amounts that aged more than 30 days.

But the question before the court on Tuesday was whether pension officials submitted invoices asking that the additional fees be paid.

Klausner argued that the invoice was issued every time the Department of Finance processed a payroll and deducted employee contributions for the pension system.

“I think there is a regular invoicing process that goes on,” he said.

Again, the judge was not convinced.

“I haven’t seen anything besides [sic] that says ‘benefits division’ and describes what the benefits division has to do,” he said.

The benefits division exists as an office in the pension system. Gomez suggested that his reading of the law suggests it’s up to that division to invoice the government for the additional interest payments.

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