PORTSMOUTH — Union city employees took allegations of misused health insurance money to the front steps of City Hall on Wednesday where they criticized the Local Government Center's handling of public funds and Portsmouth officials perceived "silence" on an issue they say is costing local taxpayers.

Fire Fighters IAFF Local 1313 President Rick Condon and Fire Officers IAFF 4039 President Bill McQuillen lead a protest where roughly two dozen current and retired city employees gathered to express anger over allegations that the LGC has withheld surplus health insurance moneys from the city and violated state law by using pooled health insurance contributions to fund a separate workers' compensation program.

Union officials want the money returned to Portsmouth to help curb the ongoing budget crunch, but LGC officials say such money is used annually to stabilize health insurance rates.

The LGC — a Concord-based nonprofit organization — manages the statewide public employees' health insurance pool.

A preliminary report issued Oct. 28 by the Secretary of State's N.H. Bureau of Securities Regulation supports allegations that the LGC's insurance programs may be operating in violation to state law due to a 2003 reorganization and that they aren't returning surplus funds to cities and towns.

Union officials have been challenging the LGC and its allocation of funds with Wednesday's gathering serving as a venue for them to voice their concerns.

Condon said Portsmouth has had to make budget cuts that have cost workers jobs and negatively impacted city services, but he said the city is making such decisions while the LGC holds an undetermined amount of "surplus" health insurance contributions.

"Many of the problems facing our city could have been avoided if the LGC had not been overcharging for our health insurance," Condon said.

They also claim the LGC violated the law by using Portsmouth health insurance contributions to "subsidize" other programs.

Condon and others claim City Manager John Bohenko, a past member of the LRG Board, and Portsmouth Human Resources Director Dianna Fogarty — a current member of the panel — have known about the problem and objected to it.

However, they said neither have done enough to protect taxpayers.

Condon said Bohenko should have warned the city about the LGC's practices and described Fogarty as a "rubber stamp" on votes that have negatively impacted taxpayers and city employees.

Union officials stopped short of saying they covered up the alleged "scheme," but questioned Bohenko and Fogarty's perceived complacency and what they are going to do to get surplus dollars returned to the City of Portsmouth.

"Today we ask the city manager and human resources director to end their silence," Condon said.

McQuillen said the city has contributed upward of $48.8 million in health insurance premiums to the LGC since 2005, but admitted union officials have no idea how much they have been overcharged.

He said the city is owed "real dollars" during a time when financial woes have city services and jobs being cut.

Also at issue is what is believed to be $282,436.27 in worker compensation contributions that city officials have asked the LGC to return to the City of Portsmouth within 60 days in the form of a credit for health insurance premiums.

City Manager John Bohenko reacted to Wednesday's protest by saying he has long objected to the LGC using health insurance premium money to fund workers' compensation.

Bohenko hasn't been on the LRC Board since 2005, but noted he was one of three members of the panel who voted against that practice when it was introduced approximately seven years ago.

"We continually pressed them on this issue, but their legal staff and the board has always taken the position this was an appropriate use of the funds," Bohenko said.

Bohenko noted they are seeking the return of the $282,436.27, but said the issue of surplus health insurance funds is one that will need to be worked out as part of an ongoing Bureau of Securities Regulation inquiry.

He disputed the union's assertion that huge sums are owed to the city.

"We aren't talking millions for Portsmouth ... we are talking (roughly) $282,000," Bohenko said.

The city manager said he was disappointed that union officials gathered on Wednesday without sitting down and talking with city officials about the issue.

Fogarty said the LGC Board voted recently to end the practice of transferring 1 percent of net contributions to subsidize other programs. She refuted claims that she ignored the issue or made a choice to not bring it to the attention of city leaders and workers.

"We, as a board, have confidential responsibilities and until it became public we couldn't speak to it. We did have concerns and opposed it," Fogarty said.

LGC Executive Director Maura Carroll denied the nonprofit has been overcharging member communities for health insurance, but noted they are cooperating with a secretary of state inquiry she said is focused on regulatory issues relating to how the organization operates and distributes its net assets to members.

"The firefighters have said we have tens of millions of dollars in reserve ... we have a reserve fund that is there to maintain the financial stability of the pool," Carroll said.

Union officials conducting Wednesday's protest acknowledged that city officials appear to have raised questions about the issue, but they noted actual requests to get any money returned came after the LGC issue was made public by the Oct. 28 release of the report by the N.H. Bureau of Securities Regulation.

While a full report on the issue isn't due until January, the author of the preliminary report — Bureau Attorney Earle Wingate — expressed concerns that the issue of appropriate reserve levels and the return of surplus monies to cities and towns remains a "major concern."

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EJ Hersom/Staff photographer Rick Condon, president of the Portsmouth Professional Firefighters union, speaks at a news conference at Portsmouth City Hall Wednesday. Condon's union along with another local union are claiming their overpayments to an insurance fund were not returned.

EJ Hersom/Staff photographer Rick Condon, president of the Portsmouth Professional Firefighters union, speaks at a news conference at Portsmouth City Hall Wednesday. Condon's union along with another local union are claiming their overpayments to an insurance fund were not returned.

EJ Hersom/Staff photographer Portsmouth Fire Lt. Bill McQuillen speaks at a news conference outside Portsmouth City Hall Wednesday. McQuillen's union is claiming overpayments made to an insurance fund were not returned.