Tag: governance

Chicago Police Pension Forensic Audit Ends With Disturbing Findings

Mary Pat Campbell

Link: https://www.forbes.com/sites/edwardsiedle/2021/09/03/chicago-police-pension-forensic-audit-ends-with-disturbing-findings/?sh=18a0d9717c0c

Excerpt:

This week, the Chicago Police Department Pension Board Accountability Group—comprised of retired and active Chicago police officers and their dependents— released the scathing findings of a forensic audit of the Chicago Policemen’s Annuity and Benefit Fund. The Group hired an outside expert to conduct the forensic audit after the pension refused their request to do so on its own.

…..

According to a lawsuit filed this week by Tobe, the pension denied most of his requests for records under the Illinois Freedom of Information Act. It’s no secret that state and local government pensions—which are supposed to be the most transparent of all pensions—are regularly criticized for opposing public record requests, particularly related to alternative investment documents.

The report accuses the pension of failing to monitor and fully disclose investment fees and expenses.  It is estimated that fees and expenses could be 10 times greater than the $7.4 million disclosed in the pension’s most recent financial audit.  Tobe believes the fees related to dozens of investment managers are not properly disclosed. Using assumptions from an Oxford study, Tobe estimated that undisclosed fees could be as high as $70 million a year. Also, $2 million to $3 million a year in investment fees may have been paid to Wall Street for doing nothing, i.e., fees on committed, uninvested capital. 

Author(s): Edward Siedle

Publication Date: 3 Sept 2021

Publication Site: Forbes

Jim Dey | After a year, Teachers’ Retirement System’s dirty laundry put on display

Mary Pat Campbell

Link: https://www.news-gazette.com/opinion/columns/jim-dey-after-a-year-teachers-retirement-systems-dirty-laundry-put-on-display/article_f9668f4b-1a9f-512f-b2b4-e04a58b7b08d.html#new_tab

Excerpt:

There was a personnel earthquake in the summer of 2020 at the Teachers’ Retirement System in Springfield.

Ultimately, five high-ranking employees were removed from their positions, including executive director Richard Ingram. The tumult generated clouds of uncertainly that only recently started to clear, revealing improper and possibly criminal behavior.

Although mum at first, TRS officials recently released their first lengthy statement about what occurred, disclosing that a new employee purposely maintained a conflict of interest that he falsely claimed to have ended.

…..

The OEIG report states the scandal dates back to 2018, when the TRS “began the process of constructing a new pension system that it called the Gemini Project.” Urbanek said the Gemini system recently went online.

That required hiring outside information technology professionals. Singh and his company — Singh 3 Consulting — were initially hired as a contractor. But in 2019, the TRS hired Singh as a permanent employee, the hiring predicated on Singh terminating his relationship with his company.

He told the TRS he had done so. But no one apparently ever checked, because subsequent investigations revealed Singh remained president and chief executive officer.

Author(s): Jim Dey

Publication Date: 12 September 2021

Publication Site: The News-Gazette

One Year After Teachers’ Retirement System Head’s Departure, Report Details More Turnover At Top

Mary Pat Campbell

Link: https://www.nprillinois.org/statehouse/2021-09-08/one-year-after-teachers-retirement-system-heads-departure-report-details-more-turnover-at-top-1

Excerpt:

One year after the head of Illinois’ largest public employee pension fund resigned due to what the fund has only described at “performance issues,” a recently published report by the state’s chief ethics officer reveals the circumstances behind the departures of two more former high-ranking officials at the pension fund in 2020.

The former chief information officer at the Illinois’ Teachers’ Retirement System repeatedly directed contracts toward the company he founded and also lied about having severed ties with the company, according to a report published last month by Illinois Executive Inspector General Susan Haling. TRS manages the pensions of more than 427,000 current and retired teachers as well as pension beneficiaries.

The report centers on former CIO Jay Singh’s conflicts of interest, but also brings to light the firing of TRS’ former chief financial officer, Jana Bergschneider, who was fired last July as the investigation unfolded. Singh resigned in April of last year, two months after he was interviewed as part of an internal investigation into his conflicts of interest.

….

Bergschneider was terminated from TRS on July 2, 2020 based upon her “work performance and conduct related to the procurement process on the Gemini Project,” the OEIG report said, apparently quoting from a reason given to investigators by the pension fund.

Ingram was placed on administrative leave at the end of that month — a result of the TRS board’s unanimous vote after an investigation into performance issued conducted by Chicago Law firms King and Spalding. He resigned a few days later and TRS remains tight-lipped about the exact reason for Ingram’s departure, calling it a personnel matter.

But Urbanek reiterated to NPR Illinois the same reasoning given every inquiring media outlet in the last year: that Ingram “had difficulties meeting performance metrics in his contract.”

Author(s): Hannah Meisel

Publication Date: 8 September 2021

Publication Site: NPR Illinois

Mismanagement Compounding Underfunding: The Chicago Police Pension Forensic Audit

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/09/06/mismanagement-compounding-underfunding-the-chicago-police-pension-forensic-audit/

Excerpt:

It is reasonably well-known that the pension plan has been underfunded for years, and that the state, in setting a new funding plan, allowed a “funding ramp” in 2011 and then re-set that ramp in 2016, so that funding according to the “90% funded by 2055” target only began in 2020. However, Tobe alleges that “Chicago has consistently underfunded the plan more than the statutory amount, blatantly breaking the law, with no consequences.”

Regarding fees and management, Tobe alleges that the pension fund has “failed to monitor and fully disclose investment fees and expenses” and that “fees and expenses could be 10 times that which they disclose” because the fund’s disclosure “omits dozens of managers and their fees.” He also reports that the Fund claimed that “hundreds of contracts for the investment managers” are exempt from FOIA, and denied him access to the fund’s own analysis of fees. He concludes that “PABF may have over 100 ‘ghost managers’ in funds of funds,” that is, the fund is required to disclose its managers but it fails to do so, even though Tobe has identified them through other sources.

…..

With respect to governance, the fund violates a fundamental aspect of prudent governance because its Chief Investment Officer is not a professional with qualification in the field, but simply a trustee and active-duty policeman, and, what’s more, one who has “22 allegations of misconduct as a police officer including one for bribery/official corruption.” Further, no staff members hold the credential of a CFA charter, another marker of professionalism. Another related governance issue is the use of offshore investments, e.g., in the Cayman Islands, which lack key governance and transparency protections of US-based funds.

Author(s): Elizabeth Bauer

Publication Date: 6 September 2021

Publication Site: Forbes

EXPOSED: How CalPERS Tried and Continues to Try to Cover Up Former Chief Investment Officer Ben Meng’s Misconduct

Mary Pat Campbell
EXPOSED: How CalPERS Tried and Continues to Try to Cover Up Former Chief Investment Officer Ben Meng’s Misconduct

Excerpt:

But we also have Meng’s unreported stock trades. And Meng’s arrival happened to coincide with a big spike in personal trading violations, which CalPERS attempted to minimize by saying they came mainly from one person.

What if it turns out that the Olson report showed that Meng was a very active trader the entire time he was there? There is no way CalPERS could suppress this information, since it was required to have been reported on the Forms 700.

This would be hugely embarrassing to CalPERS, in that it would show it had hired a CIO who didn’t have his full attention on his very big ticket say job. And it would be vastly worse if Meng as head of the investment operation had been routinely violating SEC requirements for trade pre-approvals to prevent insider trading.

This possibility seems even more likely when you look at the board transcript below. Marlene Timberlake D’Adamo droned on and on and on trying to justify CalPERS not having reviewed Meng’s Form 700 to see if it looked internally consistent and/or matched up with his trading records. At first I thought this was to exhaust the board and dissipate their energy so they’d not be as persistent about their issues when they finally got the mike. But it may also be that the compliance department was clearly remiss in not reviewing Meng’s Form 700 by virtue of him being an active trader. And if he indeed was the person who’d made the big personal trading violations, that would almost mandate reviewing his Form 700.

Author(s): Yves Smith

Publication Date: 31 August 2021

Publication Site: naked capitalism

EXPOSED: CalPERS’ Brainwashed Board in Denial that CIO Meng Caused His Own Downfall with Information He Himself Provided

Mary Pat Campbell
EXPOSED: CalPERS’ Brainwashed Board in Denial that CIO Meng Caused His Own Downfall with Information He Himself Provided

Excerpt:

 In fact, all of the damaging  information that got Meng so upset that he quit was public, and it all came directly from or was generated by Meng.

Yet the CalPERS board acts as if it’s the victim of internal saboteurs. As the transcript shows, CEO Marcie Frost and her key allies on the board, Board President Henry Jones and board member Rob Feckner repeatedly and falsely present Meng as a victim of secrets having been tossed over the transom to the press. Not only was everything that embarrassed Meng out in the open for competent reporters to write up, but in at least one and arguably two cases, Meng’s defensiveness made his situation much worse.

As we’ll show, Frost used the bogus idea that CalPERS is full of traitors as an excuse for continuing to keep the board in the dark about crucial matters like Meng being investigated for his financial conflict of interest. Frost and Feckner also claim that Meng believed that his bad press was due to saboteurs. That suggests that Frost and other senior staffers stoked Meng’s paranoia and helped precipitate his departure.

Author(s): Yves Smith

Publication Date: 26 August 2021

Publication Site: naked capitalism

CalPERS Desperate Response to Suit Over Illegal Secret Board Discussions and Other Abuses Seeks to Drag Case Out as Long As Possible

Mary Pat Campbell
CalPERS Desperate Response to Suit Over Illegal Secret Board Discussions and Other Abuses Seeks to Drag Case Out as Long As Possible

Excerpt:

Jelincic is challenging CalPERS’ dubious denials of two different Public Records Act requests he made. One focuses on impermissible secret board discussions shortly after Chief Investment Officer Ben Meng’s sudden resignation last August. The filing not only calls for these records to be made public but also demands that board members be released to discuss all the matters that CalPERS impermissibly covered in the August “closed session”. The second involves CalPERS’ continuing efforts to hide records showing how it overvalued real estate investments by $583 million. Yet CalPERS not only has said nary a peep about bogus valuations are larger than the total amount it was slotted to invest in a mothballed solo development project, 301 Capitol Mall, but it continues to publish balance sheets that include the inflated results.

We predicted that CalPERS would be be even more inclined than usual to fight these Public Records Act requests because the filing seeks remedies beyond release of the records. First, it requests that CalPERS be found to have violated the Bagley-Keene Open Meeting Act. Second, to the extent that the judge rules that the board discussed items in closed session that should have been agendized for and deliberated in open session, the suit asks that board members be permitted to disclose the contents of those particular discussions in public. Third, the filing calls on the court to require that CalPERS make video and audio recordings of all closed sessions and keep them for five years (this is something that CalPERS currently does but this obligation is meant to shut the door to “the dog ate my disk” pretenses down the road.)

Author(s): Yves Smith

Publication Date: 3 June 2021

Publication Site: naked capitalism

The Exxon Vote: Pension Supporters Stay Onboard to Advance Change

Mary Pat Campbell

https://www.ai-cio.com/news/the-exxon-vote-pension-supporters-stay-onboard-to-advance-change/

Excerpt:

Sticking around and backing dissident board candidates worked. Instead of divesting from Exxon Mobil, the US’s biggest oil company, the nation’s three largest public pension funds pursued a successful strategy of advocating for change, and they just helped elect a pair of outside directors. Expect more of this tack against fossil fuel outfits.  

Running counter to the trend of pension programs dumping fossil fuel stocks, these giant retirement systems—the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), and the New York State Common Retirement Fund—believe that, in most cases, working from within is the better way to promote change.

They were key players in electing the two outside directors (a third is still up in the air as proxy ballots are counted), along with huge asset managers BlackRock and Vanguard, plus other pension entities such as the Church of England’s program.

Author(s): Larry Light

Publication Date: 1 June 2021

Publication Site: ai-CIO

Teachers union demands leadership changes at embattled PSERS pension fund

Mary Pat Campbell

Link: https://www.post-gazette.com/news/state/2021/05/21/Teachers-union-demands-leadership-changes-at-embattled-PSERS-pension-fund/stories/202105210131

Excerpt:

A union that represents 61,000 schoolteachers statewide called on most of the board of the Pennsylvania State Employees’ Retirement System to resign amid an ongoing FBI investigation.

“Through alleged errors and omissions, and under a shroud of secrecy, this PSERS Board appears to have jeopardized the present and future financial security of our Commonwealth’s most dedicated public servants,” Arthur Steinberg, president of the Pennsylvania chapter of the American Federation of Teachers, wrote in a letter to PSERS board members.

In the letter, Mr. Steinberg called for every board member appointed prior to January 2021 to immediately resign. That would reduce the 15-member board to two: the newly elected State Treasurer Stacy Garrity, a Republican, and state Sen. Katie Muth, D-Montgomery County.

Author(s): WALLACE MCKELVEY, pennlive.com

Publication Date: 21 May 2021

Publication Site: Pittsburgh Post-Gazette

Which Public Pension Funds Have the Highest Holdings of Alternative Assets? 2021 Edition

Mary Pat Campbell

Link: https://marypatcampbell.substack.com/p/which-public-pension-funds-have-the

Graphic:

All the data for alternative allocation 2001-2020, with key percentiles plotted as lines

Excerpt:

What you see in that graph is a data point for each of the plans I know their asset allocation for, with the median, 25th percentile, and 75th percentiles marked out so you can see the allocations increasing.

That pattern does not make me feel good.

Allocating more to alternatives doesn’t seem to get asset managers higher returns. But the group is generally sliding upwards in their allocations, and I’m very unhappy about this.

Author(s): Mary Pat Campbell

Publication Date: 11 May 2021

Publication Site: STUMP at substack

Expose at Pennsylvania’s Biggest Public Pension Fund Reveals Lavish Private Equity Travel, But Misses How It Serves as a Bribe

Mary Pat Campbell
Expose at Pennsylvania’s Biggest Public Pension Fund Reveals Lavish Private Equity Travel, But Misses How It Serves as a Bribe

Graphic:

Excerpt:

The article points out that the PSERS investment office regularly violates state travel policies, which require employees on Commonwealth business to hew to Federal guidelines for airfare and lodging. Eight PSERS officers have been granted waivers from this policy.

PSERS defends the travel costs by saying staff traveled business class and the fares were typically refundable and sometimes bought at the last minute.

My issue isn’t with the cost of the flights but their necessity, and with the hotel costs. Public servants should be staying in Westin/Marriott level rooms. These prices are consistent with five star hotels, like the Four Seasons or St. Regis in New York City.

Author(s): Yves Smith

Publication Date: 12 April 2021

Publication Site: naked capitalism

CalPERS Shoots Itself in the Foot: Undermines Its Position in Insolent Letter Demanding JJ Jelincic Drop His Case Against Secrecy Abuses

Mary Pat Campbell
CalPERS Shoots Itself in the Foot: Undermines Its Position in Insolent Letter Demanding JJ Jelincic Drop His Case Against Secrecy Abuses

Excerpt:

As you can see below, CalPERS issued more ultimatums: drop the suit and provide what amounts to a document retention request to the board member that provided his notes to Jelincic.

And why should Jelincic withdraw his case? The argument is the legal version of a pratfall. Jelincic told he is liable for “aiding and abetting” an alleged breach of fiduciary duty by a a board member and interfering with CalPERS’ contract with said board member.

First “aiding and abetting” exists only in a criminal context. Even if there were actually a there there, please tell me what universe a prosecutor is going to saddle up to go after a CalPERS board member over a dispute over a clearly improperly noticed board meeting….and charge Jelincic too?

Second, the only fiduciary duty the board has is to beneficiaries. The reason California has such strong transparency laws is that its default is that secrecy is bad for the public and is not allowed unless there are compelling arguments on the other side.

Author(s): Yves Smith

Publication Date: 25 March 2021

Publication Site: naked capitalism