DOI: ‘Systemic vulnerabilities’ compromised city pension system

A former employee at the city’s largest public-employee retirement system has been sentenced to up to three years in prison for stealing $624,000 from two pensioners' accounts. The theft prompted the city's Department of Investigation to issue a scathing report detailing critical vulnerabilities in the pension system's internal controls.

Gregory Mathieu, a former associate retirement benefits examiner at the New York City Employees' Retirement System, exploited weak internal controls over nearly three years to fraudulently divert pension funds from February 2021 through January 2024, the office of Brooklyn District Attorney Eric Gonzalez said. Mathieu’s scheme involved forged electronic fund transfer authorizations, the manipulation of member profiles and the reactivation of suspended pension accounts.

Mathieu reactivated pension payments of a deceased Department of Sanitation supervisor, funneling retroactive payments of about $242,000 to himself and also triggered monthly payments of about $5,700 from May 2021 through January 2024, according to the DA’s office. 

He also stole about $199,000 from a 75-year-old retired Associated Railroad Signal Specialist employed by the NYC Transit Authority. Mathieu, who earned $85,561 in 2024, spent the stolen money on luxury items, as well as a vacation. He also made $429,000 in cash withdrawals, Gonzalez’s office said. 

"DOI’s review of NYCERS records identified systemic vulnerabilities that enabled Mathieu to manipulate NYCERS’ processes without detection," the reports notes.

Mathieu, who worked for NYCERS for about 15 years, resigned at the end of May.

"The investigation revealed that NYCERS needs to strengthen its internal controls, including its review of suspended accounts and employee training, and to implement additional security practices to detect and prevent fraud," DOI Commissioner Jocelyn E. Strauber said in a statement accompanying her office’s report.

She urged NYCERS to implement DOI’s recommendations to buttress the system against fraud.

Mathieu, 41, of Brooklyn’s Canarsie neighborhood, pleaded guilty in April to corrupting the government in the first degree, a class B felony, and agreed to pay $511,115.61 in restitution. NYCERS recovered about  $113,000 of the stolen funds from an account controlled by Mathieu.

"By abusing his role at NYCERS, he betrayed the trust placed in him as a public employee, funding a luxury lifestyle with money that should have supported retirees," Gonzalez said in a statement.

Vulnerabilities exposed

The DOI investigation, conducted together with the Brooklyn DA’s office, revealed significant gaps in NYCERS' internal controls, which allowed the theft to continue undetected for years, the independent oversight agency’s report said. It identified weaknesses in system access controls and verification procedures, and in the system’s failure to properly segregate sensitive tasks related to pensioners' payments among different units and employees.

The fraudulent activity targeted suspended pension accounts, exploiting NYCERS' limited oversight of account reactivations and inadequate monitoring of payment patterns. The scheme particularly focused on accounts with higher monthly payments, including one account with monthly payments of $3,000 or more.

The case highlights challenges facing the city's retirement system, which manages billions in pension assets for current and former municipal employees. 

A NYCERS spokesperson said the system had put in place safeguards as a buffer against asset theft. 

“NYCERS has already implemented significant improvements to its internal controls prior to the issuance of the DOI report.  We continuously assess our internal controls and processes to identify further improvements,” the pension system’s deputy director for communications, Rachel Assisi, said in an email. 

While DOI acknowledged that pension system officials have put in place significant critical enhancements since uncovering Mathieu's criminal conduct, DOI stressed that “continued vigilance and improvement of internal controls” are imperative to protect city employees’ assets. 

Among the DOI’s recommendations to strengthen NYCERS' internal controls and prevent future fraud are enhanced monitoring, including a regular review of reactivated suspended accounts, periodic audits of retroactive payments and enhanced monitoring of returned payment patterns

DOI also recommended that the pension system institute expanded bank account verification processes to include EFT requests received via mail and periodically reviews all accounts suspended for three years to determine if members are still alive. 

It suggested that NYCERS develop internal fraud algorithms to alert staff to duplicate bank accounts and other safeguards, including two-factor authentication for member-requested account changes and the replacement of mail/email/fax submissions of sensitive documents with an upload portal using two-factor authentication.

It also encouraged enhanced training for NYCERS employees, including regular ethics training emphasizing personal responsibility in fraud prevention. 

richardk@thechiefleader.com