An ongoing, three-year lawsuit against actuary firm Willis Towers Watson over pension calculations for Houston firefighters has the city fighting the release of the expert witness report that allegedly validates their allegations that the firm’s actions cost taxpayers $830 million.

To provide some background, the city filed suit against the firm in 2014 on the basis of negligent misrepresentation and actuarial malpractice. The fire fund retains the right to hire its own actuaries and retained Towers Perrin for years to prepare actuarial valuations of the fund’s liabilities and assets, as well as calculate the city’s required annual contribution. Towers Perrin has since morphed into Towers Watson and most recently, Willis Towers Watson.

In 2000, Towers provided the fund’s actuarial data to the city, upon which the city agreed to benefit increases for firefighters. The city is now saying that they were misled by Towers’ calculations and were it not for the report they would never have agreed to such changes, saying that Towers, “misrepresented that the existing benefits could be increased and the new benefits could be added without increasing the City’s contribution rate.”

Which brings us to the current issue: Houston retained Kim Nicholl of Segal Consulting as an expert witness to compile a report using Towers’ data, replicate their work, analyze the results, and then produce a statement regarding damages. Using their own calculations, Nicholl’s report purportedly shows that Towers’ misrepresentation of the cost of benefit changes directly led to the city incurring present and future damages of $830 million.

But the city is objecting Nicholl’s report being made public.

There was a supplemental protective order issued in the case at the request of Towers that would allow personal and individual information about the fund’s members to be designated as confidential. The city’s argument for keeping the entire Nicholl Report confidential is simple; they say that the report analyzes data that has been designated as highly confidential so therefore the entire report is confidential. They also argue that Towers has access to all information in the report so they shouldn’t be concerned about the public interest aspect.

Towers and their attorneys disagree.

The city’s argument that the report is confidential because the data used was confidential is baseless, says Towers, because nowhere in the report is individual data presented. Again, it is a compilation of all of that data. The supplemental protective order issued in the case only permits that individual census data be designated as confidential, not “collective analysis of data – including statistics designed to replicate Towers’ prior reports or analyses – or commentary on data which reveals nothing about individual fund participants.”

What the firm is asking to release, they claim, would not make public any individual data such as social security numbers, birthdays, individual salaries or benefits, and similar information.

When discussing government proceedings, it’s often said that the best disinfectant is sunlight. Houston taxpayers have long heard that the blame for the ever-increasing unfunded pension liabilities stems from misrepresentations by actuaries. Had the city been able to make decisions based on correct data, we wouldn’t be facing our mounting pension debt, or so they say.

There’s a problem with that argument though.

Former Houston Mayors Lee Brown, Bill White, and Annise Parker all said, under oath, that they didn’t believe the growing unfunded pension liabilities were a result of Towers’ work. Parker went as far as to say the only reason she brought forth the lawsuit was as a bargaining chip during negotiations with the fire fund. If that has changed, and the answer can be found in the Nicholl Report, taxpayers deserve the right to see that.

The city is even refusing a request by Towers to do a line-by-line redaction of confidential information followed by a subsequent release to the public. They say, “Hair-splitting redactions risk public disclosure of Highly Confidential Derivative Information and a violation of the Protective Order’s plain language.” Essentially the city is saying that neither they, nor their attorneys, can be trusted to parse through a report and release only non-confidential information.

The city says that their (and the public’s) interest in confidentiality outweighs any argument for unsealing that Towers could put forth.

Taxpayers should not find that acceptable. Taxpayers’ interests are at the center of this case and it is in their best interest for the information to be made public. It’s hard to believe that the public wouldn’t support unsealing a report that ostensibly lays out how a private entity cost taxpayers $830 million in damages.

Make no mistake, personal data of public employees should be protected, but the report is a compiled analysis of that data, not the raw data itself. Also, neither Towers, their attorneys, nor the fund are fighting for the report to be kept secret.

The Nicholl Report is important because it may, or may not, hold the answer to how the city ended up in the pension crisis in which it currently finds itself. Houston officials, fearful of accountability over pension debt, brought this fight to the public sphere by repeatedly laying blame on the actuaries. Now that the city’s expert witness has, according to them, proved how Towers is at fault, there should be no reason that those allegations are not publicly scrutinized.

Texas Scorecard requested, but did not receive a copy of the Nicholl Report through the Texas Public Information Act.

Charles Blain

Charles Blain is the president of Urban Reform and Urban Reform Institute. A native of New Jersey, he is based in Houston and writes on municipal finance and other urban issues.


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