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Detroit Pension Chair Calls for Firing of Lawyer Employed During Bribery Scandal

The Chairman of the Detroit Police & Fire pension fund is calling for the termination of the fund’s general counsel. That’s because the lawyer was employed at the fund during the bribery and pay-to-play scandal that cost the fund millions.

The general counsel, Joseph Turner, was not charged with any crimes. But the trustees have said publicly that they don’t trust him and want a clean break from the years of bribery that have plagued the fund.

From the Detroit News:

A powerful lawyer who factored into the Detroit pension fund bribery scandal and continues to wield influence over the Police & Fire retirement system could soon be out of a job.

Critics of the retirement system’s general counsel, Joseph Turner, say his continued involvement in the pension board raises questions about the city’s ability to move past a history of corruption, mismanagement and bad investments that helped push Detroit into bankruptcy.

Detroit Police & Fire pension fund Chairman Mark Diaz said he is prepared to ask board members to fire Turner and his law firm Clark Hill PLC, now that a corruption trial has ended in six convictions and Detroit has emerged from bankruptcy.

The pension board’s next meeting is Thursday.

Here’s what trustees have said of Turner, from Detroit News:

“Very simply: we don’t have confidence in him,” [Chairman] Diaz told The News Wednesday. “This is a multi-billion-dollar corporation and we cannot have the air of impropriety whatsoever.”

Fellow Trustee Georze Orzech was blunt when asked about Turner.

“He’s got to go,” Orzech said. “I don’t trust him.”

According to Detroit News, in 2007 Turner gave thousands of dollars of “birthday money” to various trustees. Soon after, the trustees voted to raise Turner’s pay from $225 to $300 an hour.

Photo credit: “DavidStottsitsamongDetroittowers” by Mikerussell – Own work. Licensed under Creative Commons Attribution-Share Alike 3.0 via Wikimedia Commons

Video: Lawmaker Calls for Investigation into Jacksonville Police and Fire Pension

Florida State Representative Janet Adkins called this week for state Governor Rick Scott to consider launching an investigation into possible misconduct at the Jacksonville Police and Fire Pension Fund.

According to Rep. Adkins, the investigation would focus on:

– Why “a special pension plan…was designed for one or two beneficiaries”

– Whether rules and laws have been broken “in regards to the creation, management and regulation of the DROP accounts”

Watch the video for more.

Cover photo by pshab via Flickr CC License

CalPERS, CalSTRS Responds To Push For Coal Divestment

California Senate President Kevin de León said on Monday he would introduce a bill in 2015 that would require CalPERS and CalSTRS to divest from coal-related investments.

CalPERS was the first of the funds to publicly respond to the bill. Summarized by Chief Investment Officer magazine:

CalPERS responded strongly to the proposal, stating that “we firmly believe engagement is the first call of action, and results show that it is the most effective form of communicating concerns with the companies we own”.

The statement also detailed CalPERS’ “proven track record” of engaging and dealing with climate change risks within its portfolio. This included CalPERS’ work as a founder member of the Investor Network on Climate Change, and its efforts to persuade governments and policy makers to support a low-carbon future.

“We are also working aggressively with a coalition of 75 international investors worth over $3 trillion in assets to engage with the 45 largest fossil fuel companies to ensure they are taking appropriate action to manage the physical and capital risks associated with climate change,” CalPERS said.

CalSTRS released its own response as well, according to ai-cio.com:

CalSTRS highlighted its review of “sustainable investing and risk management” as well as its plan to triple the value of its investments in clean energy and technology in the next five years. CIO Chris Ailman said at the time the pension could raise its allocation as high as $9.5 billion—5% of the current value of its portfolio.

CalSTRS said climate change was “a material risk assessed across the entire portfolio that could impact current and future investment value”.

“CalSTRS believes our investment decisions must carefully weigh our duty to perform profitably with consideration of environmental, social and governance impact of those investments,” it added. “CalSTRS is a patient, long-term investor, and the ultimate impact of our investment in coal is something that we will be assessing in the coming year.”

CalPERS’ full statement, released on Facebook, can be seen here.

Photo by Paul Falardeau via Flickr CC License

Experts: Japan Pension Should Be Run By Board, Not President

Currently, Japan’s Government Pension Investment Fund (GPIF) – the largest pension fund in the world – is managed by a President.

The sole trustee system is rare; it is used by a few pension funds in the United States, but more typically a board of trustees is utilized to make investment policy and governance decisions.

Now, experts are calling on the GPIF to switch to a board of trustees model.

From the Wall Street Journal:

[The] Government Pension Investment Fund should be managed by a board of directors rather than a president, as is currently the case, a panel of outside experts has concluded.

[…]

“If the coach plays with the players in a sports game, if there are mistakes in the game, it’s hard for the coach to make the tough calls he should be making as coach,” said Shuya Nomura, a Chuo University professor who was appointed last month as an adviser to the welfare minister on GPIF issues, referring to how the board of directors should be structured.

The meeting ran 30 minutes over the scheduled time as members argued over whether you could compare the GPIF to the Bank of Japan 8301.TO -0.21% or a public company. They also couldn’t reach consensus about how a nomination panel to appoint fund officials should be structured.

Perhaps it shouldn’t come as a surprise that the group has differed on some issues. Welfare Minister Yasuhisa Shiozaki, an Abe appointee and a staunch advocate of an aggressive overhaul of the fund’s management, pushed hard for the group to be formed, and some of its members have expressed views similar to his. But bureaucrats at the health ministry, which oversees the GPIF, argued that the group should include more cautious voices.

The group will present its ideas to the health ministry panel for further discussion, and eventually the ministry will draft a law to submit to parliament.

The GPIF manages $1.1 trillion in assets.

Photo by Ville Miettinen via Flickr CC License

San Francisco Pension Postpones Appointment of Board Member in Wake of Ethics Complaint

San Francisco’s former first lady Wendy Paskin-Jordan sits on the board of the San Francisco Employees’ Retirement System (SFERS); her seat is appointed by city mayor Ed Lee, who was ready to appoint her to another term.

But an ethics complaint has put Paskin-Jordan’s appointment “on hold”. The details of the complaint:

The main issue discussed Tuesday was her investment in Grantham, Mayo, Van Otterloo and Co., an investment firm, in which the employees’ pension fund has invested $388 million. In a required financial disclosure statement filed last year, Paskin-Jordan reported she had invested between $100,000 and $1 million in GMO in August 2011. That amount, however, is below the company’s minimum investment threshold of $10 million.

City law prohibits board members from investing in private equity, limited partnerships and in nonpublically traded mutual funds doing business with the Employees’ Retirement System. Additionally, city law prohibits a board member from soliciting or accepting “a business opportunity, a personal loan, a favor or anything of value from any public entity or firm doing business with SFERS.”

Paskin-Jordan has been out of town recently, but the rest of the board wants to give her a chance to explain the situation for herself in front of the board. Meanwhile, she has the support of the retirement system’s Executive Director. From the SF Examiner:

In a Dec. 8 letter to the Ethics Commission, retirement system Executive Director Jay Huish argues that both these laws were not broken by Paskin-Jordan’s investment.

Huish noted that GMO is considered a manager of public-market assets, and that Paskin-Jordan had received a threshold waiver to invest in GMO from her former employees who went on to work there. That waiver, Huish said, was granted before she was appointed to the board and exercised after she was on the board.

The San Francisco Employees’ Retirement System manages about $20 billion in assets.

Photo by ilirjan rrumbullaku via Flickr CC License

New Jersey Pension Encounters Difficulty Exiting Investment With Firm At Which Mary Pat Christie Holds Top Job

It’s been nearly four years since New Jersey’s pension system terminated an investment with Angelo, Gordon & Co, an investment firm where Mary Pat Christie, wife of Gov. Chris Christie, is managing director.

But as the International Business Times reports, the pension system is still paying fees to the firm because certain portions of the investment are particularly illiquid – the pension system has yet to be able to exit them fully.

Some say the situation is a troubling conflict of interest. Others say it is emblematic of one of the criticisms of alternative investments: pension funds can’t exit whenever they like.

From the International Business Times:

When the New Jersey pension system terminated a $150 million investment in a fund called Angelo, Gordon & Co. in 2011, that did not close the books on the deal. In the three years since state officials ordered the withdrawal of that state money, New Jersey taxpayers have forked over hundreds of thousands of dollars in fees to the firm. As those fees kept flowing, Angelo Gordon made a prominent hire: Mary Pat Christie, wife of Gov. Chris Christie, who joined the company in 2012 as a managing director and now earns $475,000 annually, according to the governor’s most recent tax return.

The disclosure that New Jersey taxpayers have been paying substantial fees to a firm that employs the governor’s spouse — years after state officials said the investment was terminated — emerged in documents released by the Christie administration to International Business Times through a public records request.

[…]

New Jersey’s original $150 million investment in Angelo Gordon was initiated in 2006, under Gov. Jon Corzine, a Democrat. By October 2011, state records show, the investment — which was in a multi-strategy hedge fund called AG Garden Partners — had generated just a 5.5 percent return in six years. That month, New Jersey investment officials sent a letter telling the firm to “withdraw, as of December 31, 2011, one hundred percent of the [state’s] capital account.” Yet the state subsequently paid Angelo Gordon management fees of more than $255,000 in 2012, more than $132,000 in 2013 and more than $82,000 for the first three quarters of 2014.

[New Jersey Treasury Department] Spokesman Santarelli told IBTimes that while “New Jersey redeemed its interest in the AG fund and ended its investment [in 2011] we still have a remaining market value of $6.6 million invested related to illiquid investments, which have been winding down slowly over the last few years.”

New Jersey State Investment Council chairman Thomas Byrne gave his reaction to the IB Times:

“This is standard; we are not doing something different here that is outside the norms of the financial industry and the world of private partnerships,” he said.

“We are paying fees on whatever money is left in there, so it could be an asset that could be increasing in value,” Byrne said. “So why should the manager work for free if they are hamstrung in the short term but they have made an investment that makes sense? A contract is a contract and presumably both sides are working in good faith to get out of it, and a deal is a deal.”

Read the entire IB Times report here.

Photo by Timothy Appnel via Flickr CC License

Unions Sue Over Chicago Pension Cuts

Chicago unions and public employees filed a lawsuit Tuesday to block pension changes coming in 2015 that would reduce future COLA increases and require workers to pay more toward their retirement.

From the International Business Times:

The law in question is scheduled to take effect in the new year and will slash pension benefits for workers and retirees in Chicago’s Municipal Employees Annuity and Benefit Fund and Board of Trustees of the Municipal Employee’s Annuity and Benefit Fund, according to the lawsuit.

The lawsuit, filed in Cook County Circuit Court, argued Public Act 98-0641 violates a provision and “straightforward promise” in the Illinois Constitution that forbids the diminishment or impairment of public employee retirement benefits. The lawsuit stated that the pension reform law, which was enacted in June, unlawfully reduces pension benefits for the plaintiffs and all others who chose a public-service career.

“Unless this court strikes down and enjoins implementation of the Act, Plaintiffs and thousands of other current and retired City of Chicago and Chicago Board of Education employees will be harmed and the trust that all Illinois citizens place in the inviolability of their Constitution will be breached,” the lawsuit stated.

The plaintiffs, comprised of 12 current and former workers and four unions, requested the court declare Public Act 98-0641 entirely “unconstitutional, void and unenforceable.” Current retirees will suffer immediately, while the same “injustice” awaits current public workers when they retire, according to the lawsuit.

Chicago Mayor Rahm Emanuel said the law was created with the support of many unions and is both constitutional and necessary to ensure 61,000 city workers and retirees receive pensions. “Without this reform, these two funds will run out of money in just a matter of years, which is why we must defend this law to protect the future of our workers, retirees, and taxpayers,” Emanuel said in a statement.

At the end of 2012, the city’s six pension funds were collectively 50 percent funded.

Photo by bitsorf via Flickr CC LIcense

San Diego Pension’s Risk Reduction Yields Mixed Short-Term Results

A series of investment policy changes made by the board of the San Diego County Employees Retirement Association (SDCERA) have saved the fund from losing tens of millions – but also prevented the fund from realizing tens of millions in returns during the third quarter.

Pension funds are particularly long-term investors and no investment policy should be judged based on one quarter’s worth of results, but the outcomes of SDCERA’s allocation changes are fascinating nonetheless.

From Bloomberg:

San Diego County’s pension fund avoided a $100 million loss in the third quarter by reducing its reliance on Treasury bonds although it forfeited about $114.4 million in gains in the past three months because it rolled back its “risk-parity” strategy, the fund’s investment adviser said in a report.

In April, the board of the San Diego County Employees Retirement Association lowered the fund’s fixed-income target to 15 percent from 60 percent by eliminating Treasuries and reducing fixed-income investments and inflation-protected securities. That helped cushion the fund from $100 million in losses in the three months ended Sept. 30, according to the report by Houston-based Salient Partners LP, which manages the $10.1 billion portfolio.

Instead, the fund for 39,000 current and retired county employees lost $4 million.

In September, the board reduced the amount of money that could be invested in futures and derivatives contracts, the so-called risk-parity category the board created in April at the urging of Lee Partridge, Salient’s chief investment officer.

Partridge objected to the September move. With retirees urging board members to reduce exposure to risk, they voted 5-2 to make the change.

Since then, the fund has lost out on about $114.4 million in returns, according to Partridge’s report.

Partridge and Dan Flores, a spokesman for the San Diego County Employees Retirement Association, declined to comment until the board discusses the report on Dec. 18.

SDCERA’s board voted to fire its outsourced CIO, Salient Partners, last month.

Photo by Andreas Poike via Flickr CC License

Canada Pension Invests $157 Million in Indian Engineering Firm

The Canada Pension Plan Investment Board (CPPIB) has made a $157 million in the infrastructure arm of an Indian engineering company.

The investment is the first direct investment in an Indian infrastructure firm by a Canadian pension fund. The $157 million is only the first installment in CPPIB’s commitment, which totals $314 million.

Details from VC Circle:

Canada Pension Plan Investment Board (CPPIB) has invested Rs 1,000 crore (around $157 million) in L&T Infrastructure Development Projects Ltd (L&T IDPL), a unit of Larsen and Toubro Ltd (L&T), by way of subscription to compulsorily convertible preference shares, as per a stock market disclosure.

The investment, made through CPPIB’s Singapore-based wholly owned subsidiary, is the first tranche of proposed Rs 2,000 crore (around $314 million now) investment that was approved by the Foreign Investment Promotion Board (FIPB), the nodal government body monitoring foreign investment in the country, earlier this year.

The two companies signed a definitive investment agreement in June this year.

“A second tranche of Rs 1,000 crore or such higher amount as may be agreed between L&T IDPL and CPPIB’s subsidiary, will be invested after 12 months from the date of the initial investment, subject to any required regulatory approvals at such time,” L&T said in the statement.

CPPIB manages $234.4 in assets.

Washington Pension Manager Commits $1.1 Billion to REOCs

The Washington State Investment Board, the entity that manages Washington state’s pension assets, has committed a total of $1.1 billion to two funds that invest in real estate operating companies (REOCs).

From IPE Real Estate:

Commitments of $600m and $500m were made to Calzada Capital Partners and Evergreen Real Estate Partners, respectively.

[…]

Calzada, which buys real estate operating companies in the Americas, places capital with companies investing in major property sectors.

It has around $4bn in assets under management.

The private equity firm has invested in Terramar Retail Centers, which owns neighbourhood shopping centres on the US West Coast, as well as in Corporate Properties of the Americas, which owns industrial property in Mexico.

Hometown America, an owner and operator of manufactured housing, Pacific Beachcomber, a luxury hospitality renovation firm in French Polynesia and Pivotal Capital Group have also received capital as part of Calzada’s niche investment strategy.

Evergreen, which invests in US-based real estate operating companies, will use capital for future growth.

The company mostly makes investments in the office, industrial, retail and apartment sectors.

The Board manages $103.6 billion in assets.

Photo credit: “Washington Wikiproject” by Chetblong – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

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