Adams v. Board of Trustees of the Teachers' Retirement System ( 2011 )

NO. 4-10-0568 Opinion filed 2/18/11
IN THE APPELLATE COURT
OF ILLINOIS
FOURTH DISTRICT
MARY ANN ADAMS, ) Appeal from
Plaintiff-Appellant, ) Circuit Court of
v. ) Sangamon County
THE BOARD OF TRUSTEES OF THE TEACHERS' ) No. 09MR848
RETIREMENT SYSTEM OF THE STATE OF )
ILLINOIS, ) Honorable
Defendant-Appellee. ) Patrick J. Londrigan,
) Judge Presiding.
_________________________________________________________________
PRESIDING JUSTICE KNECHT delivered the judgment of the
court, with opinion.
Justices Steigmann and McCullough concurred in the
judgment and opinion.
OPINION
In October 2009, defendant, the Board of Trustees of
the Teachers' Retirement System of the State of Illinois (Board),
found monies paid to plaintiff, Mary Ann Adams, while engaged in
an illegal kickback scheme did not constitute salary for pension
purposes. On appeal, the circuit court of Sangamon County
affirmed the Board's judgment.
Adams appeals, arguing her pension benefits should not
be reduced by the amount of monies paid to her while she
participated in an illegal kickback scheme. We affirm.
I. BACKGROUND
Between 1991 and 2005, Adams worked as the director of
Project E.C.H.O., an alternative high school established and
operated by the Franklin-Williamson Regional Office of Education.
Between September 1999 and August 2004, Barry Kohl was regional
superintendent of schools and Adams' supervisor. In the summer
of 1999, Adams sought to expand Project E.C.H.O., providing
services to a juvenile detention center to be built in Franklin
County. Adams earned between $50,000 and $55,000 per year. She
asked Kohl for a raise "because of the [j]uvenile [d]etention
[c]enter work." According to Adams, Kohl refused.
Later, Kohl agreed to Adams' request for a pay raise,
on condition she pay to Kohl one-half of the net proceeds of her
pay raise on a monthly basis. Between September 15, 1999, and
June 15, 2004, Adams received the salary she had previously been
paid for her employment at the regional office in the form of two
checks each month, together with the pay raise she requested and
received from Kohl in the form of two additional checks each
month. Between September 15, 1999, and June 15, 2004, Adams
cashed one of the two paychecks she received as a raise and then
delivered the proceeds of the cashed check to Kohl.
Between September 15, 1999, and June 15, 2004, Judy
Davis was the assistant director of Project E.C.H.O. In
approximately 2002 or 2003, Adams spoke with Kohl about Davis'
need for additional money. Kohl responded by asking Adams to
talk with Davis about an arrangement similar to the kickback
arrangement with Adams. Adams spoke to Davis about Kohl's
proposal and Davis agreed. Davis made monthly payments to Kohl
on the thirtieth day of each month by placing the cashed proceeds
of one of the two paychecks she received as a raise beneath the
blotter of her desk at the Project E.C.H.O. headquarters in
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Johnston City, Illinois. Adams stopped making monthly kickback
payments to Kohl in June 2004, when she became aware of an
investigation of Kohl into the misappropriation of regional
office funds.
Between September 1999 and June 2004, Adams never
reported to law-enforcement personnel her payments to Kohl.
Adams understood she was a public employee of the regional office
and the salaried compensation she received for her public
employment was funded by and with public monies. Adams claimed
she was given additional duties on or before the time she asked
for a pay raise. The Board had no evidence Adams did not perform
additional duties for the pay raises she received in any year.
Adams retired in May 2005.
In July 2008, Adams received a letter from an employer-
services auditor employed by the retirement system. The letter
follows, in pertinent part:
"The Illinois Teachers' Retirement
System reviewed earnings reported for you[]
by the Franklin-Williamson Counties ROE.
During the period 1999-00 through 2003-
04, your creditable earnings reported by the
Franklin-Williamson Counties ROE appear to be
overstated. Mr. Barry Kohl issued you a
supplemental salary contract in return for
you paying half of the additional salary to
him. The entire supplemental salary contract
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was included in your reported annual salary
rate and creditable earning each fiscal year.
The reporting of TRS member compensation
is governed by [section 1650.450 of Title 80
of the Illinois Administrative Code
(Administrative Code) (80 Ill. Adm. Code
1650.450, as amended by 27 Ill. Reg. 1668,
1676-79 (eff. Jan. 17, 2003)),] which defines
'salary' as 'any emolument of value
recognized by the System that is received ***
by a member in consideration for services
rendered as a teacher ***.' Agreements,
written or verbal, to return a sum of money
to the individual authorizing a salary
payment lacks consideration. Lacking
consideration, the amount of money that is
subject to the agreement does not qualify as
salary under TRS' salary rule."
In December 2008, Adams sought administrative review
("solely upon the record agreed to by the parties") of the July
2008 staff decision to reduce her retirement benefits.
The claims-hearing committee recommended upholding the
staff decision to disallow the following amounts as creditable
earnings to Adams: $24,175.82 for the school years 1999-2000,
2000-01, 2001-02, and 2002-03, and $26,813.19 for the school year
2003-04. The committees's written recommendation found "but for
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kickbacks to Kohl, Adams would not have received the salary raise
and enhanced pension benefits."
In October 2009, the Board voted to adopt the
committee's recommended decision. In June 2010, the circuit
court affirmed the Board's decision.
This appeal followed.
II. ANALYSIS
Adams argues she can be denied benefits only if she (1)
is convicted of a felony or (2) provided no consideration for the
additional compensation she received. We disagree.
In an appeal from an administrative agency's decision,
this court reviews the agency's determination, not the circuit
court's. Marconi v. Chicago Heights Police Pension Board, 225
Ill. 2d 497, 531, 870 N.E.2d 273, 292 (2006). In all
administrative proceedings, the plaintiff bears the burden of
proof. Marconi, 225 Ill. 2d at 532-33, 870 N.E.2d at 293. Based
upon the question presented, this court reviews agency
determinations under three distinct standards of review. The
agency's interpretation of a statute or administrative rule is a
question of law, which receives de novo review. Marconi, 225
Ill. 2d at 532, 870 N.E.2d at 293. The agency's factual
determinations will be upheld unless they are against the
manifest weight of the evidence. Kouzoukas v. Retirement Board
of the Policemen's Annuity & Benefit Fund of the City of Chicago,
234 Ill. 2d 446, 465, 917 N.E.2d 999, 1011 (2009). A finding is
against the manifest weight of the evidence where the opposite
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conclusion is clearly apparent. Peacock v. Board of Trustees of
the Police Pension Fund, 395 Ill. App. 3d 644, 652, 918 N.E.2d
243, 250 (2009). Finally, this court reviews mixed questions of
fact and law under the clearly erroneous standard. See McKee v.
Board of Trustees of the Champaign Police Pension Fund, 367 Ill.
App. 3d 538, 543, 855 N.E.2d 571, 575 (2006).
An administrative agency's decision is clearly
erroneous where the reviewing court comes to the definite and
firm conclusion the agency has committed an error. Cinkus v.
Village of Stickney Municipal Officers Electoral Board, 228 Ill.
2d 200, 211, 886 N.E.2d 1011, 1018 (2008). The clearly erroneous
standard provides some deference based upon the agency's
experience and expertise, falling between de novo and
manifest-weight-of-the-evidence review. McKee, 367 Ill. App. 3d
at 543, 855 N.E.2d at 575.
The retirement system was created to provide retirement
annuities and other retirement benefits for teachers. 40 ILCS
5/16-101 (West 2004). To determine the proper annuity for a
retiring teacher, retirement system staff must determine a
member's final average salary. See 40 ILCS 5/16-133(a)(B) (West
2004). "Final average salary" is defined as the average of the
highest four consecutive years of salary within the last 10 years
of creditable service, subject to the rules of the Board. 40
ILCS 5/16-133(b) (West 2004). "Salary" is defined as the "actual
compensation received by a teacher during any school year and
recognized by the [retirement] system in accordance with rules of
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the [B]oard." (Emphases added.) 40 ILCS 5/16-121 (West 2004).
Section 1650.450(a) of Title 80 of the Administrative Code
defines "salary" more specifically as "[a]ny emolument of value
recognized by the [s]ystem that is received, actually or
constructively, by a member in consideration for services
rendered as a teacher." (Emphases added.) 80 Ill. Adm. Code
1650.450(a), as amended by 27 Ill. Reg. 1668, 1676-77 (eff. Jan.
17, 2003).
We need not address Adams' initial argument she can be
denied benefits only if she is convicted of a felony. The Board
did not seek to terminate Adams' retirement benefits alleging a
felony conviction relating to her service as a teacher. There is
no relevant felony forfeiture statute applicable to these facts.
"[The Board] has never asserted that this applies in the case at
bar and it has never claimed that Adams' entire pension is
subject to forfeiture."
Adams next argues the kickback money she paid Kohl was
"salary" as defined by the Administrative Code. Specifically,
she argues the kickback money was additional compensation earned
for the performance of extra duties.
Before the Board, Adams alleged she had increased
duties "[b]ecause of the [j]uvenile [d]etention [c]enter work,"
but the record does not show precisely what those duties were.
Adams references as "evidence" a four-page document she prepared
at the request of an investigator for the Illinois Attorney
General's office between 2001 and 2003, and detailing her duties
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and associated compensation. The referenced document was not
included as a part of the record agreed to by the parties before
the Board, and is not a part of the record on appeal. Further,
Adams admits she did not report to the investigator the details
of the illegal kickback scheme. It is not the Board's burden to
establish Adams did not perform additional duties for the pay
raises she received in any year. The plaintiff bears the burden
of proof. See Marconi, 225 Ill. 2d at 532-33, 870 N.E.2d at 293.
Further, Adams stipulated as follows: "Kohl agreed to
Adams' request for a pay raise, on condition that she paid to him
one-half of the net (i.e. after taxes) proceeds on a monthly
basis." The monies paid Adams while engaged in an illegal
kickback scheme were not in consideration of services rendered as
a teacher. Kohl denied Adams' request for a raise. Adams would
not have been paid the monies if she did not agree to kickback to
Kohl one-half of the net proceeds on a monthly basis. The monies
paid were in consideration of Adams cooperation and participation
in an illegal kickback scheme and did not constitute salary for
pension purposes. Based upon this record, the Board's conclusion
"but for her kickbacks to Kohl, Adams would not have received the
salary raise and enhanced pension benefits" was not clearly
incorrect.
Adams next argues because the Board did not find Adams'
earnings overstated during her final months of employment where
Adams did not participate in an illegal kickback scheme, the
Board's "conduct in this respect is tantamount to an admission
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that *** Adams gave adequate consideration for the additional
duties she performed." We have already determined the monies
paid were in consideration of Adams cooperation and participation
in an illegal kickback scheme, and not additional compensation
earned for the performance of extra duties. Adams stopped making
monthly kickback payments to Kohl in June 2004 and retired in May
2005. The Board found monies paid to Adams "subject to the
agreement [did] not qualify as salary under [the Administrative
Code]." The Board apparently concluded the monies paid to Adams
during her final months of employment and after she terminated
her participation in the illegal kickback scheme were not
"subject to the agreement," and did qualify as salary.
III. CONCLUSION
For the reasons stated, we affirm the circuit court's
affirmance of the Board's determination.
Affirmed.
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