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Friday, April 6, 2012

State drops LGC conspiracy charge, motions to dismiss denied

CONCORD – One of six legal charges filed against the Local Government Center for alleged financial improprieties was dropped by the state Bureau of Securities Regulation due to “some redundancy.”

A charge alleging a civil conspiracy by LGC officials was voluntarily dismissed by BSR attorney Andru Volinsky, according to documents made public Tuesday. The charge was filed in February and alleged LGC board members and officers conspired to “accumulate excessive funds,” which should be returned to municipal members, then used them for risky investments in violation of municipal budget law.

That now-dismissed count echoes other allegations in five remaining legal counts pending against the LGC.

Those complaints allege the LGC failed to return $100 million in surplus funds to municipalities, retirees and public employees. The state also alleges the LGC formed illegal shell companies in Delaware, improperly invested member money in risky investments and skimmed money from insurance pools to create a workers’ compensation program from which only some members can benefit.

In contrast, the BSR announced last month that the Primex risk management pool, which also provides municipal insurance coverage, entered into an agreement with the state to return at least $16 million to municipal members no later than Sept. 30.

The LGC was formed as an insurance pool to achieve favorable rates for municipalities purchasing employee health and property liability insurance. It filed multiple motions to dismiss the $100 million lawsuit against it, claiming its corporate actions were allowed by law.

According to an order issued by hearings officer Donald Mitchell on Wednesday, those motions to dismiss are denied.

A hearing on the LGC allegations is scheduled to begin April 30 in Concord and is expected to last two weeks.

The state Senate last week passed a draft bill that would mandate risk management pools to operate as nonprofit organizations, have separate boards of directors and be barred from commingling funds.

The proposed bill also states that risk pools must return all surplus funds, after banking up to 25 percent above costs for reserves. Surpluses would be returned by check or rate reduction, by choice of the funding municipality, according to the proposed legislation.