Philadelphia Weekly

Philadelphia Weekly has learned that Transportation Workers Union (TWU) Local 234 is considering legal action against SEPTA, alleging mismanagement of workers’ pension funds. Local 234, which ended a six-day strike on November 8, has retained the law firm of Kaufman, Coren & Ress, P.C. The issue at hand: Workers want to know what firm the money is being invested with, what the rate of return is and what fees investors are being paid.

“We believe that SEPTA is not properly managing our pension,” Local 234 President Willie Brown says. “Even before the recession it wasn’t funded at proper levels. We want to ensure for future retirees.”

“I think members are very concerned about how underfunded the pension has been,” says Local 234 spokesperson Jamie Horowtiz. “This is a different era. People from all walks of life want more transparency and more oversight. And the kind of reporting we’ve seen from the authority is not sufficient.”


Local 234’s allegation that SEPTA is underfunding worker pensions was widely reported during the strike. Workers’ pensions are 53 percent funded, while managers’ funds are 65 percent funded.

SEPTA Press Relations Officer Andrew Busch says, “Our actuary tells us what is required to meet our pension obligation, and we meet that amount. Pension payments are guaranteed. We provide more funding to the union pension fund than to the management pension fund.” 


During the tense contract negotiations the local even demanded a forensic audit of workers’ pensions. Unlike a standard audit, a forensic audit is a highly detailed examination of funds often used to show evidence of mismanagement or wrongdoing in court. SEPTA refused, even though the union offered to pay for the audit.

SEPTA General Manager Joe Casey told the Inquirer that the request for a forensic audit was a “red herring,” saying the annual audit by Milliman Inc. was sufficient. 


According to Local 234, the union first requested a forensic audit early in contract negotiations before the strike began. Busch says the request came late in the negotiating process, and was withdrawn soon thereafter.


Brown believes SEPTA may be trying to hide wrongdoing. “If I was SEPTA and I wasn’t doing things above board, I wouldn’t want it either.”


The Local 234 executive board will meet tomorrow to make a decision on whether to pursue legal action. On Friday, union members will vote to take a ratification vote on a new contract with SEPTA.


In an engagement letter obtained by PW , the union makes it clear that concerns include potential mishandling of funds. Local 234 appears to believe that there are problems beyond complaints over pension funding levels saying, “many Plan Beneficiaries have expressed concerns to representatives of the Union regarding the chronic underfunding and possible mismanagement of the Trust Funds set up under the Plan to support the pension benefits negotiated by the Union.”


Brown reiterated these concerns, saying “SEPTA has a history of giving out contracts to friends of the board. And we just want to make sure that this isn’t going on with our pension plan. It’s basically a precaution.”


The letter says that if SEPTA does not voluntarily share the necessary information, Local 234 “will pursue appropriate legal actions to address and remedy the issues of concern to the Plan Beneficiaries.” Kaufman, Coren & Ress, P.C. will likely contract its own pension experts to investigate.

While the demand for a forensic audit was an issue that stymied an early resolution to the strike, the union decided to end the strike after resolving important issues related to health care and seniority, opting to pursue concerns over pension mismanagement through legal channels.

“The audit was the only sticking point, which they had really dug in on—somewhat to the union’s surprise,” says Horowitz. “The feeling was that this was something we would have to compromise on in the contract in order to live and fight another day. So we are pursuing other means.”

Buses, trolleys and subways are once again on the move, but it appears that the conflict between Local 234 and SEPTA is far from over.

“Workers know that this has been a long term problem, perhaps as long as 20 years,” says Horowitz. “And I think the SEPTA administration’s recent attempts during the strikes to blame it on the stock market only hardened the feeling that they need more answers.” ■