May 14, 2009
HARRY G. PARKIN, APPELLANT,
BOARD OF TRUSTEES, PUBLIC EMPLOYEES RETIREMENT SYSTEM, RESPONDENT.
On appeal from the Final Decision of the Board of Trustees of the New Jersey Public Retirement System, No. 2-10-196008.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 11, 2009
Before Judges Parrillo and Messano.
Appellant Harry G. Parkin appeals from the final agency decision of the Board of Trustees of the Public Employee Retirement System (the Board) resulting in partial forfeiture of his service and salary credits. He contends that the Board failed to follow its own regulations governing partial forfeiture of pension benefits, and further contends that the Board "adopted a rule regarding the partial termination of pension benefits without going through the regulatory process."
We have considered these arguments in light of the record and applicable legal standards. We affirm.
The essential facts are undisputed. With the exception of a four-year break in service, from 1972 to January 1, 2004, Parkin was continuously employed in various public positions until he retired as Mercer County Chief of Staff. Based upon his veteran's status, his service time, and additional credit he received as part of an early retirement incentive program, he had accumulated twenty-eight years and nine months of service credit equating to a monthly pension of $5864.49.
On March 11, 2004, Parkin was indicted by a Federal grand jury and charged with having participated in a wide-ranging, corrupt scheme utilizing his office as Chief of Staff to defraud Mercer County and its citizens. The indictment alleged numerous acts Parkin committed in furtherance of the plan while employed as Chief of Staff. After a jury trial, in March 2005, he was convicted of all charges. In August 2005, he was sentenced to a period of ninety months imprisonment.
The Board considered Parkin's continued entitlement to pension benefits at its September 2005 meeting. Applying the factors set forth in N.J.S.A. 43:1-3(c), the Board determined a partial forfeiture was warranted for the period of time Parkin served as Chief of Staff, i.e., from June 1, 1994, to the date of his retirement. As a result, Parkin became ineligible for veteran retirement status and additionally lost early retirement incentive benefits. His monthly pension amount was significantly reduced and he no longer qualified for lifetime medical benefits.
On appeal to the Office of Administrative Law, Parkin argued that the Board had arbitrarily chosen the forfeiture period to run from his first day as Chief of Staff, rather than the time his misconduct allegedly first occurred, i.e., in September 2000. The administrative law judge (ALJ) initially recommended the Board supplement the record regarding its selection of the date upon which to commence the forfeiture period. In September, 2007, the Board filed a supplementary statement of its reasons for selecting the initial date of Parkin's employment as Chief of Staff as the operative date of forfeiture, relying heavily upon the statements made by the sentencing judge in which he outlined the nature and extent of Parkin's criminal conduct. The ALJ issued his initial decision in November 2007 ordering forfeiture of all of Parkin's service from the date he became Chief of Staff; the Board adopted the ALJ's recommendations and this appeal ensued.
Before considering Parkin's specific arguments, we set forth the statutory and regulatory framework in which they are raised. N.J.S.A. 43:1-3 provides in relevant part:
a. The receipt of a public pension or retirement benefit is hereby expressly conditioned upon the rendering of honorable service by a public officer or employee.
b. The board of trustees . . . is authorized to order the forfeiture of all or part of the earned service credit or pension or retirement benefit of any member of the fund or system for misconduct occurring during the member's public service which renders the member's service or part thereof dishonorable . . . .
c. In evaluating a member's misconduct to determine whether it constitutes a breach of the condition that public service be honorable and whether forfeiture or partial forfeiture of earned service credit or earned pension or retirement benefits is appropriate, the board of trustees shall consider and balance the following factors in view of the goals to be achieved under the pension laws:
(1) the member's length of service;
(2) the basis for retirement;
(3) the extent to which the member's pension has vested;
(4) the duties of the particular member;
(5) the member's public employment history and record covered under the retirement system;
(6) any other public employment or service;
(7) the nature of the misconduct or crime, including the gravity or substantiality of the offense, whether it was a single or multiple offense and whether it was continuing or isolated;
(8) the relationship between the misconduct and the member's public duties;
(9) the quality of moral turpitude or the degree of guilt or culpability, including the member's motives and reasons, personal gain and similar considerations;
(10) the availability and adequacy of other penal sanctions; and
(11) other personal circumstances relating to the member which bear upon the justness of forfeiture.
d. Whenever a board of trustees determines, pursuant to this section, that a partial forfeiture of earned service credit or earned pension or retirement benefits is warranted, it shall order that benefits be calculated as if the accrual of pension rights terminated as of the date the misconduct first occurred or, if termination as of that date would in light of the nature and extent of the misconduct result in an excessive pension or retirement benefit or in an excessive forfeiture, a date reasonably calculated to impose a forfeiture that reflects the nature and extent of the misconduct and the years of honorable service.
N.J.A.C. 17:1-6.1, the Board's implementing regulation, provides in relevant part:
(a) . . . .
(b) Whenever the Board of Trustees determines that a partial forfeiture of pension or retirement benefits is warranted, it shall order that benefits be calculated as if the accrual of pension rights terminated as of the date the misconduct first occurred unless (c) below applies.
(c) In circumstances where the termination of pension rights as of the date of the misconduct results in no reduction, or a minimal reduction of pension or retirement benefits, or in an excessive forfeiture, as compared to the nature and extent of the misconduct and the years of honorable service, the Board may, in its sole discretion, provide a more equitable relief. Alternate methods available to the Board when a forfeiture of service renders an unreasonable or unjust result include, but are not limited to:
1. Forfeiture of salary credit upon which retirement benefits are based;
2. Forfeiture of system-paid retired State Health Benefits;
3. Forfeiture of right to participate in the retired SHBP and SEHBP;
4. Reduction in monthly retirement allowance;
5. Forfeiture of service and/or salary credit in a specific title or rank;
6. Forfeiture of service in excess of that needed to qualify for a specific retirement benefit; or
7. Forfeiture of a percentage of the retirement benefit based on the calculation of the percentage of time which was dishonorable service as compared to the total years and months of service credit.
Parkin argues that this framework creates a presumptive date for commencement of any partial forfeiture, i.e., "the date the misconduct first occurred." Only if that results in "no reduction, or a minimal reduction . . . or in an excessive forfeiture, as compared to the nature and extent of the misconduct and the years of honorable service" may the Board deviate and choose a different commencement date. N.J.A.C. 17:1-6.1(c). He contends that if the Board ordered partial forfeiture from the date his misconduct arose, the actual effect upon his pension benefits would still be substantial, not "minimal." Thus, he argues there was no basis for the Board to deviate from the presumptive operative date, and, therefore, the use of subsection (c)'s exception was neither justified nor adequately explained. In so deciding, the Board, he argues, essentially adopted a new regulation without the required process of review and comment, permitting it to order a partial forfeiture from the date a pensioner "began serving in the position he held when the offense was committed."
Our review of final actions by an administrative agency is limited. Bueno v. Bd. of Trs., 404 N.J. Super. 119, 124 (App. Div. 2008). We are restricted to four essential inquiries:
(1) whether the agency's decision offends the State or Federal Constitution; (2) whether the agency's action violates express or implied legislative policies; (3) whether the record contains substantial evidence to support the findings on which the agency based its action; and (4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[George Harms Constr. Co. v. N.J. Tpk. Auth., 137 N.J. 8, 27 (1994).]
We also afford "substantial deference to an agency's interpretation of a statute" that it must enforce. Richardson v. Bd. of Trs., Police and Firemen's Ret. Sys., 192 N.J. 189, 196 (2007). We are, however, "'in no way bound by the agency's interpretation of a statute or its determination of a strictly legal issue.'" Ibid. (quoting In re Taylor, 158 N.J. 644, 658 (1999) (in turn quoting Mayflower Sec. Co. v. Bureau of Sec., 64 N.J. 85, 93 (1973)).
The Legislature determined that the Board, in the first instance, "shall consider and balance" eleven factors to determine "whether forfeiture or partial forfeiture of earned service credit or earned pension or retirement benefits is appropriate[.]" N.J.S.A. 43:1-3(c) (emphasis added). These factors essentially codify those set forth in Uricoli v. Bd. of Trs. Police and Fireman's Ret. Sys., 91 N.J. 62, 77-78 (1982). We agree with Parkin that the Legislature intended "the date the misconduct first occurred" as the initial, operative date from which the Board "shall" order that "the accrual of pension rights terminate." N.J.S.A. 43:1-3(d). However, the Legislature also provided for the Board to specifically use its discretion and choose a different date "if termination as of [the date the misconduct first occurred] would in light of the nature and extent of the misconduct result in an excessive pension . . . ." Ibid. (emphasis added).
Under the statutory scheme, the Board is vested with the authority to order a total forfeiture of pension benefits if the "nature and extent of the misconduct" warrants such a sanction. Whether to impose a full forfeiture, or the lesser sanction of a partial forfeiture, is an issue left to the Board's sound discretion, which it must exercise by utilizing the statutory factors and weighing the public and private interests at stake. See In re Kim, 403 N.J. Super. 378, 387 (App. Div. 2008) (discussing exercise of agency discretion in imposing a lesser sanction after balancing public and private interests).
Our review of the Board's decision convinces us that it appropriately considered the statutory factors in imposing only a partial forfeiture upon Parkin's pension benefits. It considered the eleven statutory factors in light of all the circumstances, including the serious and pervasive nature of Parkin's criminal enterprise.
The Supreme Court has recognized that "the pension forfeiture policy is penal in nature and has as its objectives the same considerations underlying all such schemes: punishment of the individual and deterrence, both as to the offending individual and other employees." Eyers v. State, Bd. of Trs., Pub. Employees' Ret. Sys., 91 N.J. 51, 56 (1982) (citing Uricoli, supra, 91 N.J. at 70). The Board is charged with the duty to implement these objectives, and it must do so with a mindful eye toward its fiduciary obligations to protect pension funds on behalf of all members. Mount v. Bd. of Trs., Pub. Employees' Ret. Sys., 133 N.J. Super. 72, 86 (App. Div. 1975). As a result, we will not second guess the sanction an administrative agency has imposed unless "such punishment is so disproportionate to the offense, in light of all the circumstances, as to be shocking to one's sense of fairness." In re Zahl, 186 N.J. 341, 354 (2006) (quotation omitted).
The ALJ's findings, adopted by the Board in its final decision, noted that Parkin's "corrupt conduct was spread over a period of years, certainly not the whole of his tenure as chief of staff, or even half of that time, but nevertheless not within a very confined period of days or even months[.]" He further noted the conduct "involve[ed] careful planning, thought and consideration that is perhaps more troubling in its conception and its carrying to fruition than a quickly entered into, short-term event." Given the length of the corrupt conduct, the ALJ further noted that "th[is] level of evil, of greed, of dishonesty, displayed by the miscreant merits a more severe sanction than where the actor has done something rash and of short term duration."
We conclude that the determination of the Board ordering forfeiture of Parkin's pension benefits from the first day he served as Chief of Staff until his retirement was entirely consistent with the statutory and regulatory scheme, was well-founded on the evidence in the record, and was not arbitrary, capricious or unreasonable. We therefore affirm.
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