Louisiana Legislative Auditor
Daryl G. Purpera, CPA, CFE

December 7, 2015

Municipal Employees' Retirement System Funds Spent on Travel, Gifts, Extended Hotel Stays with Questionable Benefit to Members

Over a five-year period, the former executive director of the Municipal Employees' Retirement System (MERS) used MERS funds to pay for more than $317,000 in conference training that included expensive dinners, cocktail parties, and extended stays in hotel rooms for MERS employees, board members and their guests.

This is one of the findings contained in an investigative audit the Legislative Auditor released Monday.

The audit centers on the controversial "Educational Conference Account" that MERS' former Executive Director Robert Rust created in April 2007 with the approval of MERS Board of Trustees (Board). From January 2010 through December 2014, MERS, through Mr. Rust, solicited and received $212,484 for this account, mostly from investment firms that contract with MERS.

MERS is the public retirement system that provides retirement benefits to eligible and participating employees of most incorporated villages, towns and cities within Louisiana.

State law requires annual educational training on investments and investment strategies for MERS Board members and employees. However, the audit found that Mr. Rust used Educational Conference Account funds and other MERS funds to pay for a variety of expenses that did not appear to benefit MERS or its members.

These questionable expenses included seven out-of-state pre-conference "planning" or "scouting" trips that Mr. Rust and his family took at a cost to MERS of $14,590. On one 2011 Easter weekend "scouting trip" to Sandestin, Florida, Mr. Rust used MERS funds to rent a three-bedroom, three-bath house at Sandestin Golf and Beach Resort. On another Easter weekend "planning trip" to Point Clear, Alabama, MERS paid for two hotel rooms and Pro Shop charges.

The audit also found that from January 2010 through June 2015 MERS paid Mr. Rust's cell phone bill, which included an extra cell phone for one of Mr. Rust's sons (who was not a MERS employee). Documents show that Mr. Rust eventually reimbursed MERS $3,413 in eight separate payments for his son's portion of the bills, but in some instances not until 13 months after MERS paid his bill.

Mr. Rust told auditors that he considered the "Educational Conference Account" funds solicited from investment firms to be private funds and therefore appropriately spent.

"Our research did not find any provision of law that allows funds held by a public retirement system to be considered private funds," said Legislative Auditor Daryl Purpera. "If Mr. Rust spent MERS funds on things that do not benefit MERS or its members, then that represents a possible violation of state law and Louisiana's Code of Governmental Ethics by Mr. Rust and potentially by the Board, if the Board approved those expenditures."

For more information contact:

Legislative Auditor
225.339.3800



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