Oak Brook isn't responsible for paying most of the $740,000 bill related to a pension bump former police Chief Thomas Sheahan received, a DuPage County judge ruled.
The written opinion, issued Tuesday by Judge Terence Sheen, reversed a decision by the Illinois Municipal Retirement System Board by saying Sheahan violated the state pension code by attempting to transfer service credits from his previous government jobs in Deerfield and Chicago.
"Left unchecked, Mr. Sheahan's pension gimmicks would have left the village with an unfunded liability of over $740,000," Village President Gopal Lalmalani said in a statement. "I am very pleased that the court honored the rule of law to prevent yet another example of pension abuse in our state."
Oak Brook Village Attorney Peter Friedman on Wednesday said the judge's ruling means the village only has to pay roughly $100,000 toward Sheahan's pension.
The decision also sets the stage for a fight about whether IMRF can stop paying Sheahan roughly $77,000 a year in pension funds. In fact, officials with the retirement fund say they plan to seek the return of money Sheahan already has received.
"Given the court's opinion, he (Sheahan) is not entitled to the $77,000 a year, and he was never entitled to it," said Louis Kosiba, IMRF's executive director.
"So going forward, we don't pay him anything," Kosiba said. "And because he was never entitled to it, IMRF is going to want to come back and recoup that payment."
Lonny Ben Ogus, Sheahan's attorney, disagrees with that interpretation of the ruling.
"The only thing the judge said is Oak Brook doesn't have to pay IMRF," Ogus said. "He didn't say IMRF doesn't have to pay Tom Sheahan."
The controversy began when Sheahan, who worked a little more than six years for Oak Brook, sought to raise his pension benefits after his resignation in April 2011. At that time, Sheahan shifted his previous pension service credits into a special IMRF program for police chiefs.
Combining service credits from Deerfield and Chicago with the credits he earned with Oak Brook was intended to qualify Sheahan for the Sheriff's Law Enforcement Personnel Plan.
But the judge ruled that Sheahan didn't comply with the law when he applied for the transfers. For example, he wasn't an active member of IMRF when he applied to have his Deerfield fund transferred.
Oak Brook officials say they didn't know about the transfers and were shocked to get a bill for more than $740,000 from IMRF.
"He (Sheahan) had been with the village for just six years and, all of sudden, we got a bill indicating that we had to pay IMRF upward of $50,000 a year for a long time to cover a very large pension," Friedman said. "So it was quite disturbing to the village."
Despite a challenge by the village, the retirement system's board upheld the pension. So the village appealed to the circuit court.
In his ruling, Judge Sheen said the IMRF Board made an error by upholding the transfers.
On Wednesday, Kosiba said IMRF won't appeal the ruling. "If there is any appeal, it would have to be by Mr. Sheahan," he said.
In the meantime, the retirement fund plans to comply with the court ruling.
"I see no way that we're able to pay a benefit to him (Sheahan) because the court basically said he didn't qualify," Kosiba said.
But Ogus says Sheahan, who currently serves as village manager of Lyons, followed all of IMRF's rules and instructions. "Why would he lose when he did exactly what they told him to do?" he said.
As for a possible appeal, Ogus said a decision hasn't been made. "We're weighing our options," he said.
Friedman said the Illinois Pension Code is complicated and some public employees seek loopholes to maximize their pension payouts.
"While the taxpayers must foot the bill for loopholes that are legal, the taxpayers and the courts should not allow public employees who do not comply with the law to reap windfalls," Friedman said. "Mr. Sheahan sought to exploit the pension code at the expense of Oak Brook residents."