The retirement systems of the city of Detroit, which encompass both the Police and Fire Retirement System and the General Retirement System, are potentially facing significant financial losses due to a payment-card scheme that has recently come to light. This scheme, currently under investigation by the Michigan State Police, may have resulted in losses amounting to “several hundred thousand dollars.” These retirement systems serve a substantial community, covering around 19,000 current retirees and approximately 8,000 active employees.
A former staff member of the retirement systems has become the central figure in this investigation. According to a statement released by the Retirement Systems of the city of Detroit, this individual was taken into custody by Michigan State Police on Wednesday. The arrest followed an earlier investigation by other law enforcement agencies into an unrelated criminal matter, which subsequently brought this case to the attention of the state police. As of Friday afternoon, Michigan State Police have not provided additional details regarding the arrest.
The fraudulent activities under investigation involve the misuse of prepaid payment cards. These cards are typically issued to retirees who do not have bank accounts, also known as unbanked consumers. Bruce Babiarz, a spokesperson for the Police and Fire Retirement System of Detroit, noted that approximately 120 retirees utilize these prepaid cards for their pension payments.
The investigation began in earnest on July 3 when Michigan State Police contacted the retirement system to alert them to potential fraud and request their cooperation. In response, the retirement system has been working closely with state police, providing requested documents and adhering to the investigation’s confidentiality requirements. The state police also issued a search warrant for specific records from the retirement system, which management has complied with fully.
The retirement systems’ statement indicated that the former employee allegedly reissued payments onto these prepaid credit/debit cards, facilitating the theft. Upon becoming aware of the fraudulent activities, the Retirement Systems of the city of Detroit took immediate action to prevent any further unauthorized transactions. The full extent of the theft is still being determined, but preliminary estimates suggest it could be as much as several hundred thousand dollars.
Given the active nature of the investigation, officials with the retirement systems have been advised by state police not to comment further on the matter. The General Retirement System and the Police and Fire Retirement System, while operating as separate entities, share a common staff and office space to reduce overhead costs and improve operational efficiency.
The General Retirement System oversees a fund valued at $1.7 billion, serving roughly 11,000 retired members and 5,000 active members. Similarly, the Police and Fire Retirement System manages a $2.7 billion fund for about 8,000 retired police and fire personnel and 3,000 active first responders.
This investigation highlights the ongoing challenges in safeguarding public funds and the importance of stringent oversight in managing retirement systems. The city of Detroit’s retirement systems continue to cooperate fully with the Michigan State Police to resolve this issue and prevent future occurrences.