The state legislators who oversee retirement systems want auditors to review an investment of about $100 million made by three local government pension plans with a New York firm reportedly being investigated by federal authorities.
State Rep. Kevin Pearson, R-Slidell, who chairs the Louisiana House Retirement committee, and state Sen. Butch Gautreaux, D-Morgan City, chairman for the Senate Retirement panel, asked for audits of the transactions with Fletcher Asset Management of New York.
Gautreaux said hard numbers are necessary for lawmakers to determine what, if any, future actions might be necessary.
Pearson questioned why the three boards were not more skeptical about an investment that promised returns too good to be true. “It brings into question a lot of things about their investment decision-making, like, what were you thinking?” Pearson said.
The state Legislature oversees two of the three retirement systems involved: Firefighters Retirement System of Louisiana, and the Municipal Employees Retirement System of Louisiana.
The third system involved, the Firefighters’ Pension and Relief Fund of the City of New Orleans, is not overseen by legislators because it is among the retirement plans for employees of large cities with home rule charters.
State government does not guarantee any of the pension plans for firefighters, law enforcement, prosecutors and other employees of municipal and parish governments. The employees and the government employers must cover the losses.
Pearson said he plans to ask the legislative auditor to look into how investment decisions are made by the boards running the pension plans his committee helps oversee.
“It’s what we can do now,” Pearson said. “It’s my responsibility to ask how did this happen? Why did this happen?”
Louisiana Legislative Auditor Daryl Purpera was out of the office. But Paul Pendas, the assistant auditor for Audit Services, said of Pearson’s request: “We haven’t gotten an official request but we’ve been talking to them and I’ve been assured we will.”
Pendas said state auditors would look at the investment practices and policies of the retirement boards, then compare those findings to what other pension systems do.
The New York Times on Wednesday quoted an unnamed “person with direct knowledge of the situation,” as saying the U.S. Securities and Exchange Commission had opened “an inquiry” into Fletcher Asset Management.
SEC spokeswoman Judith Burns declined to comment.
Fletcher Asset Management reports managing about $500 million. Three Louisiana retirement systems reported investing about $100 million in 2008.
The three retirement systems, acting independently, asked for payment of some of the profits that Fletcher reported had been made on the investments, according to a joint statement issued earlier this week. Fletcher issued a note promising to pay the full amount requested in two years.
“The distribution of a promissory note in lieu of immediate cash has raised concerns with each of the systems’ respective boards,” the statement read.
The three pension systems’ executive directors who signed the statement did not respond to requests seeking comment. They are Steven S. Stockstill of the Firefighters Retirement System of Louisiana, Richard Hampton of the Firefighters’ Pension and Relief Fund of the City of New Orleans, and Bob Rust, of the Municipal Employees Retirement System of Louisiana.
The three Louisiana pension systems also announced that a team of auditors is being assembled to “closely examine Fletcher’s books and financial statements.”
Queries to Fletcher Asset Management were directed to Casey Klurfeld of SKDKnickerbocker, a strategic communications firm in New York. She did not return calls seeking comment on Thursday and Friday.