Opinion ID: 747621
Heading Depth: 2
Heading Rank: 2

Heading: Background--Defendants

Text: 13 In November of 1985 defendant Jerry E. Abramson was elected mayor of the City of Louisville. After taking office in January of 1986 he appointed defendant Stuart P. Jay to the position of director of finance and budget for the city. 14 Mr. Jay, described in a 1983 magazine article as one of Louisville's young millionaires, is said to have been chairman of RETS Electronic Institute until he sold it in 1985. He apparently decided to donate his services to the city--a decision that may or may not have been influenced by the fact that his home was located several hundred feet outside the city limits and he thus failed to meet a statutory residency requirement. The residency issue came to public attention in 1992, and Mr. Jay then relinquished the director of finance position to become a special assistant to the mayor. 15 At the time of his appointment as director of finance, Mr. Jay was on record as having disputed the efficacy of covered call option writing. (The complaint describes him as a long-time opponent of this investment strategy....) The director of finance is a member of the police pension fund board of trustees ex officio, and from the inception of his service on the board Mr. Jay attempted--unsuccessfully, as it turned out--to have Mr. Cullinan fired as one of the fund's money managers. Jay was joined in this effort by defendant Earl Mac Unger, a city employee who was likewise an ex officio member of the board of trustees. Jay and Unger were critical of the brokerage commissions paid by the fund on transactions involving assets managed by Cullinan, and Jay had his own investment strategies that he wanted the pension fund to follow. 16 The city was facing serious financial problems when the Abramson administration took office in 1986, and one of the ways in which the new mayor hoped to ease these problems was by having active members of the public safety forces transferred to the County Employee Retirement System. With the city's support, legislation making such transfers possible was enacted by the Kentucky General Assembly in April of 1986. The legislation provided, among other things, that 17 If policemen of [a] city of the first class [having a police officers' pension system] elect entry into the County Employees Retirement System and thereby create excess funds [in the municipal pension system] ... these excess funds shall be distributed to the city for use by the city for any other purpose it may elect.... KRS 95.290(3). 18 Louisville police officers who were on active status in 1986 could elect to transfer to the county retirement system, as we understand it, and police officers hired in the future were to be placed in the county system automatically. In July of 1986 the city calculated that nearly $4 million (out of approximately $84 million in the police officers' pension fund prior to the split-up of the fund) had become excess as a result of transfers to the county retirement system. Pursuant to an agreement negotiated with the collective bargaining representative of the police officers, the plaintiffs' complaint avers, $3,955,540 was withdrawn from the police pension fund for uses agreed to by the city and the bargaining representative. 4