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Proposed law targets pensions of embezzlers

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A spate of public embezzlement cases in Northern Kentucky has prompted a lawmaker to propose a way for the public to get some of its money back.
Sen. Chris McDaniel, R-Taylor Mill said he will soon file a bill to prevent any public employee convicted of embezzling taxpayer money from keeping their pensions.
It would also make it easier for the wronged city, county or state agency to recover pension assets of someone who embezzled from that agency.
“A pension is a benefit accrued for exceptional service given, or honorable service,” McDaniel said. “It is not designed for people to commit crimes in office.”
Kentucky law currently requires any public employee convicted of embezzling public funds to forfeit their pension rights and benefits but not their accumulated contributions into the pension system. And for high paid employees, that could be tens of thousands of dollars.
Most states do not allow for the seizure of pension funds from public employees, with only 21 states having some form of pension fund seizure for public employees convicted of crimes, according to the National Conference of State Legislatures.
Recent cases of embezzlement in Northern Kentucky angered McDaniel.
• In August, police arrested Covington Finance Director Bob Due and have accused him of stealing more than $600,000 from the city.
• Earlier in the year, former Dayton schools Superintendent Gary Rye was accused of receiving $223,672 in unauthorized personal benefits during an eight-year period;
• Former Boone County Water District General Manager Phil Trzop, 62, was sentenced to 60 days in jail for abuse of public trust related to improper use of funds from the sale of scrap metal. Trzop buried $5,100 of taxpayer money in his backyard. An additional $7,600 is missing.
“People should know better than to behave like that,” McDaniel said. “When these issues came up one after the other, I was irate. It’s called public service for a reason.”
McDaniel’s bill would prevent the public employee convicted of such crimes from keeping their pension contributions, which they currently can under state law, and would give cities a clear right to recover those funds.
Such a law would be an asset to cities trying to recover funds, said Frank Warnock, city solicitor of Covington. Covington has filed suit against its former finance director and hopes to get Due’s pension funds, Warnock said. But what, if any, pension funds can be recovered varies depending on the case, and cities must make a clear case the funds come directly from the embezzlement, he said. Having a law giving cities a clear right to the funds would simplify the process, he said.
“Right now, it’s not black and white,” Warnock said. “It would make it clear the exemption would not be there to give protection to someone who has stolen money from his or her employer.”
Whether McDaniel’s bill will get support in the General Assembly isn’t clear. About 20 percent of bills introduced in the past two regular sessions have become law.