By
Christian Berthelsen
Los Angeles Times Staff Writer
When Reed Royalty endorsed Orange County Supervisor
Janet Nguyen's reelection campaign last month, he
praised her for seeking to reduce pension benefits for
sheriff's deputies "that may be unconstitutional."
It was a logical comment for Royalty, an advocate of low
taxes and limited government who is president of the
Orange County Taxpayers Assn.
But it was a disquieting remark, many thought, for a man
who is also chairman of the agency that manages those
pension benefits -- an agency now being sued by the
county in an effort to roll them back. The lawsuit was
initiated by Nguyen and her colleagues, who contend that
the higher pension benefits for deputies are
unconstitutional.
Royalty's dual roles, as an anti-tax champion on one
hand and an administrator of pension benefits for
retired government workers on the other, has put him in
a seemingly incompatible position, pitting his private
views that public employee pensions have run amok
against his legal duty to look out for the financial
interests of retirement system members.
It is a fine line that he said he had tried to tread
carefully. He said he sought legal opinions from
multiple lawyers who assured him he had a 1st Amendment
right to continue criticizing public pensions as long as
he clearly identifies that he is speaking as a private
tax activist. He said he saw no conflict between his
public and private roles, and declined to comment on any
questions about the county's pending litigation against
the Orange County Employee Retirement System.
"I'm doing a good job for the taxpayers, and I'm not
doing anything to the detriment of OCERS," he said. The
distinction is lost on union leaders whose members are
in the pension system. They resent the county's efforts
to reduce benefits and fear that, with Royalty leading
the way, the retirement board will not defend the case
vigorously.
"I was very disappointed to see that the chairman of
OCERS, the man entrusted to protect our pensions, has
decided to abandon his official fiduciary duty in
pursuit of politics," said Wayne Quint, president of the
Assn. of Orange County Deputy Sheriffs. "His public
congratulation of Supervisor Nguyen for suing the very
organization he chairs is both shocking and bizarre."
Added Nick Berardino, general manager of the Orange
County Employees Assn., the largest union of county
workers: "He is basically sitting at the head of a group
that is supposed to defend the interests of the
retirement system, and at the same time he is going
around applauding and aiding another group that is suing
that same system. He just makes a mockery out of
legitimate county government interests."
At issue is a 2001 labor agreement between the deputies
union and the county that increased pension payments by
one-third and granted the benefit retroactively,
bringing the average pension salary for retired deputies
to $70,000 per year, by the estimate of county
Supervisor John Moorlach.
Moorlach believed the county could not legally grant the
benefit because he said it violated the state
Constitution's prohibition on deficit spending,
committing the county to $187 million more in payments
in the coming decades than it had money to pay. He led
the board to a unanimous vote in January to file the
lawsuit.
Royalty has long criticized public employee pensions,
saying their growing cost is eating into government's
ability to provide services and build infrastructure. He
is also a member of the advisory board of the California
Foundation for Fiscal Responsibility, a group that has
pushed to reduce the burden of public pensions on
government.
In a March 6 statement, Nguyen announced that she had
received the Orange County Taxpayers Assn.'s
endorsement. The announcement quoted Royalty as saying,
"Fiscal responsibility has always been Supervisor Janet
Nguyen's trademark. . . . In addition to saving
taxpayers hundreds of millions of dollars in unfunded
liability, Supervisor Nguyen has supported measures to
reexamine retirement benefits they may be
unconstitutional."
Royalty's endorsement remark is also focusing renewed
attention on the county's last-minute decision to name
the retirement system as the defendant rather than the
deputies union -- prompting speculation that some kind
of fix is in because of the political dynamics involved.
When county officials first began talking of suing to
rescind the pension spike, the deputies union had always
been discussed as the defendant. But in the days before
supervisors formally voted to move forward, the
retirement board suddenly became the target.
County lawyers declined to explain how that change
occurred, saying only it was the recommendation of the
law firm hired to handle the case.
The change appeared to catch Royalty by surprise; he
testified at the board hearing that the retirement board
did not belong in the case.
But he, along with three other members of the retirement
board, could well determine how the board handles the
case. The board also has four union-backed members, but
the deputies union nominee, Richard White, had to recuse
himself because he has a direct financial stake in the
outcome. The move also created a situation in which the
county is paying for both sides in the case, since the
legal fees to defend the suit come in part from the
money the county puts into the retirement fund to pay
for benefits.
The retirement board has sought to move the case out of
Orange County to ensure a fair hearing. The deputies
union is seeking to intervene in the case because it
wants to be sure its members' interests are represented
aggressively.
"From the association's point of view, you can't help
but be suspicious of this change," Quint, of the
deputies union, said. "Put yourself in our shoes. What
would you think?"
Julie Wyne, an assistant chief executive and lawyer for
OCERS, said Royalty's comments do not constitute a
violation of his legal obligations.
"As long as he's not identifying himself as speaking on
behalf of OCERS, as long as he's clearly identifying who
he's speaking for, he's not breaching any fiduciary duty
to our system," Wyne said. "It's challenging to manage
communication issues, but this specific instance does
not appear to violate the policy."
Royalty defended his remarks in his endorsement message
for Nguyen.
The taxpayers association "supports an effort to
determine if those benefits are constitutional or
legal," he said. "I'm glad that the Board of Supervisors
is taking steps to determine the constitutionality of
those benefits."
christian.berthelsen@latimes.com
