ethics complaint | Pension360

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

Christie Dismisses Conflict of Interest, Pay-to-Play Allegations as “Garbage”

Journalist David Sirota has written a series of reports since over the last five months detailing the possible conflicts of interest and pay-to-play violations under the surface of the New Jersey pension system.

On Monday, Christie gave his first extended response to the allegations and denied them categorically. From Politicker NJ:

“There’s no appointed people in my administration that make those decisions,” Christie responded when asked about the allegations, reiterating an earlier defense of his administration and brushing off the accusations as innaccurate. “Those decisions are all made by folks in the Department of Treasury who are career employees. And the appointed folks on the pension board, both Republicans and Democrats, don’t make decisions about individual investments.”
[…]

“So all of those are just factually incorrect,” Christie said. “Nobody in my office had any input or discussion in any way with anybody from Treasury or the pension board for that matter about how we invest our pension funds.”

He also said “nobody should be complaining” when it comes to the state’s pension fund, lately burdened with millions in underfunded liabilities, given a high rate of anticipated returns– 7.9 percent — on the fund’s investments.

“And over my fours years as governor we’ve made 12 million over the 7.9 percent,” he added. “So the investments have gone very well.”

A major New Jersey union filed an ethics complaint against the pension system earlier this summer. The union said in the complain that the chairman of the State Investment Council “violated the Division’s own rules barring politics in the selection and retention of such funds and investments, and has further created an appearance of impropriety.”

New Jersey Investment Council Member Defends Robert Grady, Pension Investments

The New Jersey State Investment Council, the entity that oversees investments for the state’s pension fund, has lately been embroiled in controversy revolving around Council Chairman Robert Grady and allegations of conflicts of interest driving investment decisions.

On Thursday, one member of the Council, Guy Haselmann, defended Grady in a letter to the editor published in the Times of Trenton. The letter reads:

The chairman of the State Investment Council (SIC), Robert Grady, has done an outstanding job conducting the business of the council wisely, ethically, apolitically and with the utmost propriety. Recent criticisms levied against the chairman personally, and against the performance of the SIC and the Division of Investments (DOI) politically, are without merit.

The mission of the SIC, of which I am a member, is to provide policy and governance oversight of the DOI. In other words, the SIC does not make investment decisions or select outside managers; rather, it verifies that procedures and investment parameters are met, with the goal of maximizing return per unit of risk.

Disagreements or complaints regarding the governor’s stance on pension reform are matters completely separate from the management and oversight of the pension’s assets. Public input is always welcome; however, baseless attacks and misinformation disseminated via blogs and other means interfere with the timely and efficient work of the DOI and the SIC, and thus does a disservice to all involved, and especially to the 767,000 beneficiaries of the New Jersey Pension System.

The pension fund returned 16.9 percent in FY 2014, which ends June 30, well above benchmarks and the actuary return assumption. This is testament to the successful oversight and fiduciary duties of the SIC and the DOI.

Pension360 has covered the ethics complaint filed by a union over the alleged conflicts of interest.

Reporting by David Sirota sparked the controversy. His pieces on the topic can be read here.