Cop collected $600,000 in disability pension for a broken finger. CalPERS wants some back

Former Oakland police officer Michael Shinn was on leave with a broken finger when he found out his boss planned to fire him for failing to file a report, according to an account in a recent ruling from an administrative law judge.

Two weeks later, in June 2008, Shinn applied for an industrial disability pension with the California Public Employees’ Retirement System, saying the injury he had sustained to his right ring finger while making an arrest was so severe he could no longer do the job.

The pension system approved his application, and by the end of 2009 he was collecting $60,000 per year from the state and had started a new job at the Department of Homeland Security as a criminal investigator.

Last week, the CalPERS board determined its approval of Shinn’s pension 12 years ago was a mistake, and ordered him to pay back $200,000 of the $612,000 in pension payments he received. The board’s determination finalized an administrative law judge’s ruling to the same effect.

CalPERS attorneys objected to Shinn taking a new job they said was similar to the one he had just left due to a disability. But the crux of their case was a City of Oakland settlement agreement that let the former officer clear his name and keep his pension.

State law requires CalPERS to recoup overpayments when it finds out about pension mistakes, whether the mistake was made by the retirement system or a public employer.

Shinn’s case, which CalPERS started investigating in 2016 after an anonymous complaint, reflects the intricacies of enforcing the state’s 1,300-page Public Employees’ Retirement Law.

Settlement agreement

Shinn in filed a grievance over his firing, saying it was driven by an officer who disliked him and was competing with him for a promotion.

He had been accused of failing to file a report after he investigated a threatening note at a dispatcher’s home. In an interview, he said the note was left by a 10-year-old and that he did file a brief “assignment report” on the incident.

He settled with the city in September 2009, just before his grievance reached arbitration. The agreement said he could keep collecting the disability pension he was already receiving and that the city would enter a finding of “not sustained” in the investigation. Shinn agreed not to reapply to the Oakland Police Department.

Unlike other types of pensions, industrial disability pensions are tax-exempt, and employees may start collecting them earlier than the minimum ages required for standard service pensions, typically 55 to 62. “Industrial” means the disability came from an on-the-job injury.

CalPERS notified Shinn in May 2019 that it was canceling his pension, and ordered him to pay back the full $612,000. Shinn appealed the decision.

Administrative Law Judge Holly Baldwin largely sided with CalPERS in a December ruling, saying Shinn’s agreement violated a state law forbidding employers from using disability pensions as a substitute for discipline.

But the system could only collect three years’ worth of overpayments, or about $200,000, under a statute of limitations, according to Baldwin’s ruling.

“We’re not happy about it and we’re exploring what other options we may have in that regard,” said CalPERS general counsel Matt Jacobs.

Shinn said the Oakland Police Department’s termination process wasn’t complete due to his grievance, so it shouldn’t have triggered the law Baldwin cited.

His attorney, James Lassart, told the CalPERS Board that CalPERS had approved the industrial disability pension and was paying it by the time the settlement was reached, so any language in the agreement suggesting the pension was a substitute for discipline was “illusory and pure surplusage of no effect.”

Additionally, the City of Oakland notified CalPERS of the disciplinary actions it took against Shinn both at the time of his firing and when the city notified CalPERS it had confirmed Shinn was disabled, Lassart told the board.

Shinn said he needed to clear his name before he could go to work for the Homeland Security Department, and faced a tight deadline to do so under federal employment rules.

“I went back because I wanted to put bad guys in jail and help do that to make the world a safer place,” Shinn said. “That’s the only reason I had to take that settlement agreement.”

An evolving law

California tightened restrictions last year for working while collecting a disability pension. Since Jan. 1, 2020, retirees collecting a disability pension may not return to a job with any employer that “includes duties or activities that the person was previously restricted from performing at the time of their retirement.”

If they do return to work while receiving a disability pension, the law requires them to notify the retirement system.

Older laws restrict retirees with CalPERS disability pensions from going back to work for CalPERS-covered agencies while they are still collecting pensions. Those laws don’t prevent retirees with disability pensions from going to work for other agencies, such as the federal government.

Shinn, who recently retired from the Homeland Security Department job, said the finger injury to his dominant hand made him unable to work as a street cop but didn’t impede his work as a federal criminal investigator.

The injury, sustained in a struggle to arrest someone in August 2007, caused nerve damage that prevents him from applying downward pressure with the finger, he said.

“I continue to be unable to grapple with people and control them to the point where I can arrest them. That’s a requirement for being a police officer; it’s not as much for being a federal agent,” he said.

Two doctors told him he was no longer fit to carry out his police officer duties after he injured the finger, and then the City of Oakland’s doctor affirmed that decision, according to information in the judge’s ruling. A fourth doctor who examined his hand in relation to a workers’ compensation claim came to the same conclusion, according to the ruling.

During the application for the Homeland Security Department, a different doctor concluded he had “recovered” to the point of being capable of carrying out the duties of the new job without restriction, according to information CalPERS submitted in the case.

The doctors’ determinations limited CalPERS’ ability to pursue Shinn’s case as fraud, which has a longer statute of limitations, said John Shipley, a senior CalPERS attorney.

This story was originally published February 23, 2021 at 11:52 AM with the headline "Cop collected $600,000 in disability pension for a broken finger. CalPERS wants some back."