Fund sued over ‘double dipping’ allegations

Saipan Mayor Juan B. Tudela’s consultant, Michael C. Malone, has sued the NMI Retirement Fund and its administrator Karl T. Reyes over the Fund’s order to recover alleged overpayments made to him for “double dipping.”

In a petition for judicial review, Malone asked the Superior Court to set aside and vacate the Fund’s Dec. 27, 2005, order that sought to recover benefits paid to him as a retirement annuity while he was working with the Office of the Saipan Mayor.

Malone asked the court to overrule that order, which determined that he had no right to be paid as a mayoral employee and receive retirement benefits concurrently.

The plaintiff wants the court to determine that his status as a retiree who is receiving benefits was properly exempted by the statute from the proscription against reemployment/double dipping.

According to Malone’s petition—filed through counsel Robert T. Torres—he retired from his work with the CNMI government on Dec. 15, 2001, resulting in him receiving a pension as a Fund beneficiary.

At the request of then Saipan Mayor-elect Juan B. Tudela, Malone said he agreed to draft the mayor’s inaugural remarks, to be delivered during his first day in office in January 2002. On that day, Tudela asked Malone to serve as an adviser in an initial capacity as an employee for a period of 60 days.

Torres said that, prior to the expiration of the 60-day employment period, Tudela wrote to then Gov. Juan N. Babauta asking, with the concurrence of the Fund’s board of trustees, Malone’s exemption from the re-employment restrictions.

In March 2002, Babauta notified the Fund that he was granting Tudela’s request and is exempting Malone from the re-employment restrictions.

Torres said Babauta sent a copy of the exemption letter to Tudela and Malone, who, relying on this letter, continued his services as a government employee.

After one month, the Fund’s board met and granted Babauta’s request for Malone’s re-employment exemption.

Torres said that on May 23, 2002, Mariano Taitano, the Fund’s benefits manager, wrote to Babauta in his capacity as the Fund’s acting administrator at that time, advising him that the board had voted to concur in the re-employment exemption for Malone.

Torres said that after one week, Juan I. Tenorio, in his capacity as the director of Office of Personnel Management, notified Tudela that OPM would not process Malone’s personnel action because OPM believed it to be prohibited under the law.

While the request for a legal opinion was pending, on Aug. 13, 2002, Fund administrator Reyes notified Tudela in writing that the board had decided to rescind its earlier concurrence to Malone’s re-employment exemption, Torres said.

The administrator, Torres said, did not notify Malone to stop working for Tudela, nor did Reyes inform Malone or Tudela that the Fund would be seeking to recover overpayment of retirement benefits that had been paid to Malone.

Given the pending legal opinion and the board’s decision, however, Malone continued to work without compensation at the office of Tudela.

On Sept. 24, 2002, the AGO issued an opinion, informing the OPM that its belief as to Malone’s inability to receive benefits while serving the Mayor as an adviser was incorrect.

The AGO opinion stated that the prohibition on double-dipping cited by the personnel director had been repealed and Malone could be re-employed without restrictions based on the questions presented.

Despite the opinion, the administrator and the board took no corrective action to rectify its erroneous decision, Torres said. The Fund did not provide Malone with any notice that his pension would be suspended, he said.

“No one from the Fund bothered to inform Tudela that Malone should not be receiving retirement benefits while serving as an employee of his office,” Torres said.

Almost one year later or on Sept. 9, 2003, the administrator notified Malone in writing that the statute prohibited him from being employed or returning to government service under a “consulting contract,” and advised him of his right to appeal the decision.

Malone appealed.

At the Jan. 19, 2005, hearing, the Fund argued for the first time that Malone was an employee, rather than a consultant, Torres said.

The following day, Malone terminated his services as an employee of the Mayor.

On Jan. 24, 2005, Reyes sent Malone an amended notice that he was “double dipping.” The Fund also notified him that it would seek to recover “overpayments” of pension benefits paid to him during his period of re-employment.

Torres said Malone had received no salary from the Mayor’s Office from the 61st day following his re-employment on March 14, 2002 until November 2002.

Malone’s salary was reinstated following the issuance of the AGO opinion issued in Sept. 2002, he said.

On July 1, 2005, the Fund’s administrative hearing officer, James Hollman, recommended a decision to the board of trustees, saying that the Fund was estopped from collecting overpayment of benefits from the date of Malone’s retirement until February 2004, the date of the issuance of AGO legal opinion.

Malone appealed Hollman’s determination and so did the administrator.

The board purportedly rejected the proposed decision of Hollman, and on Dec. 27, 2005, the board instead adopted certain proposed findings of fact and conclusions of law.

The Dec. 27, 2005 order of Fund chair Joseph C. Reyes directed the Fund to take necessary and proper measures to recover any overpayments made to Malone.

This prompted Malone to file this petition.

Torres said the order was “arbitrary, capricious, an abuse of discretion, and not otherwise in accordance with law.”

In directing the Fund to take necessary and proper measures to recover alleged overpayments of benefits to Malone, the Dec. 27 order runs contrary to Malone’s constitutional and statutory rights, Torres asserted.

“In directing the Fund to take necessary and proper measures to recover alleged overpayments of benefits to Malone, the Dec. 27 order is unsupported by and contrary to substantial evidence of record, including the administrative record and the findings of fact and conclusions of law by the administrative hearing officer, who presided over the testimony and taking of evidence,” he added.