Last week we brought you the story of an Arizona pension fund that was embroiled in not one, not two, but three separate investigations: The first, a criminal investigation for allegedly inflating asset valuations to trigger bigger bonuses. Second, a workplace investigation into a sexual harassment complaint. The third, a state inquiry into illegal raises of up to 27 percent given to employees of the fund.
The latter investigation wrapped up over the weekend, and the state brought a swift, strong ruling: The Public Safety Personnel Retirement System (PSPRS) will have to fire its top administrator and undo the raises it gave its investment staff. The Arizona Republic reports:
The Public Safety Personnel Retirement System on Wednesday halted illegal pay raises of up to 27 percent that were improperly authorized late last year for five investment-staff employees and were uncovered by The Arizona Republic.
“As of today, we will immediately stop any future payments of the improperly implemented salary adjustments to all five investment staff employees,” PSPRS Chairman Brian Tobin wrote in a letter Wednesday to a state official who further acknowledged the payments violated state law.
Trust administrator Jim Hacking acknowledged Tuesday that PSPRS gave the pay raises without the approval of the state Department of Administration, as required by law. Trust officials refused to say who authorized the pay increases, but Hacking has final authority in all personnel decisions.
Jim Hacking, the fund’s top administrator, is now on leave and is expected to be fired by July 21. He had no comment on the matter.
These raises weren’t your run-of-the-mill, cost-of-living salary increases. On the contrary, the fund was doling out heavy chunks of change to its investment staff, according to The Republic:
Records show the pay increases ranged from 7.5 percent to 26.7 percent, with four of the employees getting annual salary increases in excess of $22,000. Trust officials refused to say how much had been illegally spent, but records compiled by The Republic indicate the total amount in raises was roughly $86,000.
The illegal raises are the latest problem for the trust, which is under a state workplace-violation investigation and a federal criminal probe. The $7.9 billion trust provides retirement benefits for Arizona police officers, firefighters, elected officials and prison guards.
“They are spending money that is not theirs,” said Levi Bolton, executive director of the 14,000-member Arizona Police Association. “Why not just go out and buy a pony?”
Those receiving the raises were:
• Mark Steed, chief of staff. His pay increased by 26.7 percent, or $27,142, to $128,741.
• Shan Chen, lead portfolio manager. His pay increased by 19.4 percent, or $22,296, to $136,991.
• Mark Lundin, deputy chief investment officer. His pay raise was the only one not retroactive. His pay increased 13.46 percent, or $22,890 to $192,890.
• Martin Anderson, deputy chief investment officer. His pay increased by 13.3 percent or $24,400, to $208,000. Hacking also gave Anderson a three-year contract on June 1 that includes guaranteed raises and a $69,000 retention bonus in 2017.
• Vaida Maleckaite, investment operations analyst. Her pay increased by 7.5 percent, or $5,895, to $83,895.
Did the staff deserve raises? Who knows. The PSPRS was only 60% funded as of 2012, which doesn’t reflect all that well on the fund’s management.
While Hacking is surely his way out, he may take a good chunk of money with him. That’s because the fund’s board is now tasked with negotiating a settlement package with Hacking. The board extended his contract last December, and it lasts until July 2015. He currently makes $234,000 a year.