Should felons keep their California pensions? This court case could give a new answer

Wes Venteicher

A landmark state Supreme Court decision from July might have breathed new life into a felon’s four-year fight to get his full public pension back.

Contra Costa County firefighter Jon Wilmot retired in December 2012 and was later convicted of felony embezzlement for stealing from his employer for more than a decade. On Jan. 1, 2013, a new California law took effect that says public employees can’t accrue pensions while committing felonies in the course of their work.

Citing the 2013 law, the county recalculated Wilmot’s pension in 2016 to exclude 13 years’ worth of benefits earned during the time he was stealing, reducing it to $2,859 per month from about $8,800 per month.

Wilmot has been fighting to restore his pension ever since. He argues that the reduction violates the so-called California rule, a longstanding set of legal precedents that generally prohibits public employers from reducing employees’ pensions, because the law that allowed the county to trim his pension didn’t take effect until after he retired.

He lost twice in lower courts, but the Supreme Court ordered another review of his case after it issued a July decision that generally upheld the California rule.

“The law changed after he separated from employment and it should not apply to him,” said Tim Talbot, an attorney representing Wilmot.

Wilmot’s case is set to become the next test of the California rule following the state Supreme Court’s decision in Alameda County Deputy Sheriff’s Association v. Alameda County Employees’ Retirement Association, which revolved around a ban on “pension spiking,” or artificially inflating one’s pension before retirement. That ban was also included in the 2013 Public Employees’ Pension Reform Act.

The court generally upheld the California rule in its Alameda decision but allowed county pension systems to recalculate pensions to exclude certain benefits associated with spiking. Last month, the court sent Wilmot’s case back to the First Appellate District Court of Appeal with instructions to review it in light of the new precedent.

A ruling in Wilmot’s favor could have implications for some high-profile cases in which felons have lost portions of their pensions.

Former CalPERS Chief Executive Officer Fred Buenrostro retired in 2008 and had his pension reduced after a 2014 felony conviction related to a bribery scheme.

Former California Highway Patrol Assistant Chief Sheldon “Kyle” Scarber stopped working in December 2012, a week after helping his son flee to Mexico after a rape conviction. He used accrued sick leave and vacation days while he wasn’t working and retired in October 2013. He was convicted of a felony conspiracy charge in June 2018 and CalPERS recalculated his pension to exclude the stretch of time in 2013 following his crime.

County returned pension contributions

Wilmot was accused of stealing hundreds of items from his employer from 2000 through 2012, ranging from light bulbs, batteries and pencils to chainsaws, ammunition and guns.

When the Contra Costa County Employees’ Retirement Association recalculated his pension in 2016, the system also returned $250,000 in contributions Wilmot had made toward his pension during the years he was found to have been stealing.

Wilmot’s case involved questions about when he technically retired, but the parties in the case are gearing up to tackle the central California rule questions in the upcoming appellate court proceedings.

The longstanding rule has long been generally interpreted to allow benefit reductions only if they are accompanied by equally valuable new benefits. In Alameda, the Supreme Court said that in some cases, where the Legislature can prove changes meet high standards, it may reduce pensions without providing new advantages.

In the case of pension spiking, the Legislature’s permissible purpose was curbing abuses, according to the court’s ruling.

California attorney general sides with employer

The state Attorney General’s Office filed a new brief in Wilmot’s case arguing that felony forfeiture also targets abuses.

“The fundamental principle that pensions exist to reward faithful service, and should therefore not unfairly enrich employees who criminally abuse their positions, is critical to the theory and successful operation of California’s pension program,” the office said in its brief. “If employees who criminally abuse their positions of public trust were nevertheless permitted to draw a full pension for decades into their retirement, it would incentivize the very abuse that pension systems are designed to curb, and erode public trust.”

But the court ruled otherwise in a 1954 decision with some similarities to Wilmot’s case.

In the old case, which is referenced in the Alameda decision, a Fresno police chief retired in 1949 and was later convicted of tax fraud.

When the chief started earning a pension, the system didn’t have any restrictions related to felony convictions. While he was employed, the city passed a law saying that felons would have to completely forfeit their pensions. After he retired, the city canceled his pension based on that law.

In a 1954 ruling, the court said that while pension modifications may be allowed in order to “cope with changing times,” the change to the police chief’s pension wasn’t reasonable.

The court decided the change didn’t have any “material relation to the theory of the pension system or to its successful operation,” but rather was “designed to benefit the city and, as stated in the city’s brief, to meet the objections of taxpayers who would be opposed to contributing funds for the maintenance of a pensioner who had been convicted of a felony.”

The appellate court faces a similar decision for Wilmot, although it’s not clear whether the Fresno police chief committed tax fraud in the course of his employment.

Wilmot’s case is one of two felony forfeiture cases the Supreme Court sent back to the appellate level.

Tod Hipsher retired in 2013 and was convicted in 2014 of directing an offshore gambling operation while employed by the Los Angeles County Fire Department.

Los Angeles County determined he had committed the crime in the course of his work, and the county pension system reduced his pension. Hipsher sued.

An appellate court ruled that the retirement system, not the county, had to make the decision on whether the crime was committed in the course of his work.

The Supreme Court sent the case back to the appellate court with instructions to vacate its decision and review the case again based on its Alameda ruling.