Thank You for Your (Dis)Service–Corrupt Former Newark Water Agency Head Seeks Pension Payoff

It has been nearly six years since the quasi-public entity that was once responsible for the reservoirs that supply Newark’s drinking water shut down amid widespread corruption that sent at least six people to prison and helped drive the agency into bankruptcy.

Now, the person who once ran the agency and another high-level employee–both currently doing time in federal prison for their on-the-job misdeeds–are trying to collect pensions worth hundreds of thousands of dollars. And it looks like they might get their payday.

The Newark Watershed Conservation & Development Corporation (NWCDC) was established in 1973 to manage Newark’s Pequannock watershed property, 35,000 acres spread over six municipalities in Morris, Sussex and Passaic Counties. Operating under contract with and funded almost entirely by the City of Newark, it also ran the water treatment facility and storage reservoirs.

The NWCDC was governed by a Board of Trustees that included the mayor serving ex officio as chair, two members of the City Council, and up to eight others appointed by the mayor with the advice of the Board and the advice and consent of the Council.

Linda Watkins-Brashear, of West Orange, the NWCDC’s Executive Director from April 2007 to March 2013, was charged with taking part in a wire fraud scheme to defraud the NWCDC by accepting bribes and kickbacks from contractors, using money they were paid by the NWCDC based on invoices that were fraudulently inflated or issued for work that was never done. She was also charged with failing to report $316,000 in income received through the kickback payments.

In her 2015 guilty plea to two of the charges, she admitted to accepting nearly $1 million in kickbacks and filing a false income tax return for 2012.  She was ordered to pay $1.3 million in restitution and sentenced to eight and one-half years in federal prison. She is currently incarcerated at a minimum-security prison camp for women in Alderson West Virginia with an April 21, 2025 release date.

Donald Bernard Sr. was a consultant to the NWCDC from 2008 to January 2010) and was then hired as special project manager, a position he held until March 2013.  He also owned three companies that entered into no-bid contracts or loans with the NWCDC.

In July 2017, he admitted he was part of a corrupt arrangement with Watkins-Brashear to solicit the kickbacks, and that he failed to report $314,000 in income he received from the scheme. He pleaded guilty to two counts of a 20-count federal indictment–using interstate facilities to promote and facilitate bribery in violation of the Travel Act, and filing a false personal tax return for the 2009 tax year.

Bernard, also a West Orange resident, was sentenced to eight years and is doing his time at the Schuylkill FCI, a medium security prison in Minersville, PA. His expected release date is December 2, 2024.

The NWCDC dissolved in 2013 shortly after the corruption came to light and has been in bankruptcy since 2015. Management of the watershed was handed off to Newark’s Department of Water and Sewer Utilities.

The NWCDC exists now solely to marshal its assets and pay off claims, under the supervision of two court-appointed interim trustees: Dorothea Wefing, a retired Presiding Appellate Division judge who sat as a temporary Justice on the state Supreme Court during the standoff between Senate President Stephen Sweeney and Governor Chris Christie, and Edwin Stier, a former state and federal prosecutor who has conducted and supervised investigations for businesses across the country and sits on the state Advisory Committee on Police Standards.

The NWCDC had a pension program for its employees, which was insured by the Pension Benefit Guaranty Corporation (PBGC), a federal agency created to protect private sector, single-employer defined benefit pension plans. It steps in to cover benefits–up to certain limits–when companies terminate their plans or go into bankruptcy and cannot meet their obligations. The PBGC can seek to recover the cost of the benefits from the assets of the bankrupt employer.

Watkins-Brashear is seeking pension benefits valued at $478,615.57 and has filed a claim for that amount in the bankruptcy case, In re Newark Watershed Conservation and Development Corp., Case No. 15-10019.

Bernard has also asserted his own pension claim for $176,123. 24, with his wife Sharon Bernard filing an identical, derivative claim.

Papers filed by the interim trustees indicate that, due to Watkins-Brashear’s “machinations,” her pension claim is by far the largest with a monthly benefit of about $5,500 while that of almost every other NWCDC employee is less than $1,000.

Aside from the sheer amount of her and Bernard’s pension claims is that allowing them makes the NWCDC Pension Fund insolvent, according to the trustees. If they forfeit their pensions, however, there should be enough money to pay the pensions of the other employees, who are not charged with wrongdoing.

The interim trustees decided back in 2016 that Watkins-Brashear and Bernard were not entitled to pensions. Following their appointment, they say the Plan actuary advised them that the Plan was underfunded by $400,000 to $500,000.  After the NWCDC dissolved and all its employees were transferred to employment with the City of Newark, no further contributions were made to the Pension Fund. The insufficiency of money for pensions was part of the reason the NWCDC filed for bankruptcy. Once it did, it contacted the PBGC to let them it know the Fund was insolvent and request that it assume responsibility for the Pension Plan.

While waiting for a response from the PBGC, the interim trustees approved resolutions on May 9, 2016 denying pensions to Watkins-Brashear and Bernard and informed each of them in writing later that month.

The letter to Watkins-Brashear said she was ineligible for a pension based on her guilty plea, in which she admitted that she breached her fiduciary duty as a trustee of the Pension Plan by criminal and corrupt actions that were detrimental to it. Among the actions it cited were her improperly inflating compensation for herself and others and enrolling ineligible people in the Plan.

The letter to Bernard stated he had never met the qualifications to receive a pension benefit, which requires at least 1,000 hours of actual service per year. But he was never a “legitimate” NWCDC employee and by his own admission during his plea, he was improperly paid for his “corrupt practices, including kick-backs, which causes serious harm to the NWCDC,” said the letter. The trustees demanded the return of nearly $18,000 mistakenly paid to him on his pension.

Once the PBGC took over the Pension Fund, it was provided with copies of the resolutions. Subsequently, in May 2015, it filed proofs of claim in the bankruptcy. It seeks $1,796,575 from the NWCDC to cover the shortfall in benefits for all NWCDC employees.

The lawyer handling the pension aspects of the bankruptcy, Stanley Epstein, wrote to the PBGC on March 9, 2018, urging denial of the pensions.  Forfeiture was called for because Watkins-Brashear, a fiduciary of the Plan, padded the payroll for herself and others, caused the Plan to be amended to increase her benefits and further caused the under-funding of the Plan by her admitted criminal embezzlement, wrote Epstein, who is with Greenberg Dauber Epstein & Tucker in Newark. According to papers filed in the case, Watkins-Brashear lowered the pension eligibility age from 65 to 55 (she was then 63), and amended it to allow for lump sum payments.  She allegedly knew at that point, January 2013, that the state Comptroller was investigating the NWCDC and of the agency’s “imminent demise.”

As for Bernard, Epstein wrote that he “admitted his role was to arrange and collect kick-backs from suppliers to benefit himself and Watkins-Brashear. He performed NO services for NWCD and was wrongfully put on the payroll by his co-criminal, Watkins-Brashear” and thus, his employment was fraudulent and should not be counted as ‘Hours of Service’ that could qualify him for a pension benefit.”

Epstein offered to cooperate with the PBGC in defending against the pension claims but to challenge any claim by the PBGC for a shortfall improperly determined by allowing the claims of Watkins-Brashear and Bernard.

In a May 2018 letter to the PBGC, Daniel Stolz, the NWCDC’s bankruptcy lawyer, again argued for disallowing the pension claims, saying Watkins-Brashear “systematically used her executive position with the NWCDC to steal millions of dollars from the citizens of Newark, and flagrantly abused her power as a fiduciary.”  Bernard was her “henchman” whom Stolz believed never performed any services as an NWCDC employee “but instead worked full time to facilitate Watkins-Brashear’s thievery.” He formally requested an explanation of how the PBGC’s claim against the NWCDC was calculated and also asked the PBGC to let NWCDC know if it plans to pay or is already making payments on the pensions. If Watkins-Brashear and Bernard receive benefits before the PBGC’s claim is finally adjudicated, it will prejudice the NWCDC efforts to prevent the pair from being “unjustly enriched at the public’s expense.”

The NWCDC trustees tried another route to try to block the pensions. In 2018, they asked the judge in the criminal case, Chief U.S. District Judge Jose Linares, to modify the sentencing order so that Watkins-Brashear and Bernard could satisfy the restitution components ($1.3 million for her, $1.15 million for him) by waiving their pension claims. Otherwise, they told the court, the PBGC might pay them benefits, increasing the amount the NWCDC must repay the PBGC, thereby doing further damage to the NWCDC.

The PBGC opposed the trustees’ motion, which was denied February 11 on the ground that the NWCDC had not shown a material change in the defendants’ economic circumstances since initial sentencing that might affect their ability to pay restitution, as required under the Mandatory Victims Restitution Act. Pointing out that the PBGC had not made a final decision on whether to award pension benefits to Bernard or Watkins-Brashear and that the NWCDC was still in the midst of its Chapter 11 bankruptcy, Linares wrote that “the NWCDC’s claimed material change in economic circumstances is hardly a change and certainly not material.”

Rebuffed by Linares and lacking a satisfactory response from the PBGC, the trustees are now looking to the bankruptcy court. On March 19, they filed a motion asking Bankruptcy Judge Vincent Papalia to reduce or expunge the claims of the PBGC, Watkins-Brashear, and Bernard.

The City of Newark, whose funds were wrongfully diverted by Watkins-Brashear and Bernard and others, is the NWCDC’s largest creditor and it would be “inequitable” for the PBGC’s claim, which includes more than $600,000 attributable to the two, to diminish the recovery from the bankruptcy obtained by the City and “other genuine creditors,” said the trustees in their motion papers.

Only Bernard filed a response, in an April 16 letter written from prison.   He says he is now pro se and proceeding in forma pauperis but in the summer of 2016, when his pension benefits were discontinued, his criminal defense lawyer, Thomas Ashley of Newark, sent a letter contesting the move. Among other things, the letter said a complete pension forfeiture was unjust based on a conviction for actions that occurred during only one quarter of the time he was employed at the NWCDC.

Bernard’s April 16 response also mentioned several “pertinent facts,” including: his wife has a 100% interest in his pension and the NWCDC has ignored her rights as an “innocent party”;  an actuary for the former Plan administrator told him the Plan was fully funded but the new trustees were holding up distribution; he was receiving benefits before being criminally charged; and Brashear’s actions cannot be held against him.

The NWCDC withdrew the motion and plans to refile it.  I will update you on what happens.

 

2 thoughts on “Thank You for Your (Dis)Service–Corrupt Former Newark Water Agency Head Seeks Pension Payoff

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