Pension trustee interrogates investigator

 

Pension trustee interrogates investigator

 

Date: January 19, 2011
by: Kurt Schultheis | City Editor

 
 

Firefighters Pension Board trustee Gerald Feder has only been on the board for two months and attended two meetings, but already he has become a vocal member of the board.

Although a $50,000 pension investigation by Ocean Ridge-based Benchmark Financial Services is inevitable (three firefighter board members — a majority — support the investigation), Feder took a stand against the study at a Jan. 12 special meeting.

The firefighters want to analyze all past decisions made by the board and its pension attorney and actuary, even though the board’s actuary and attorney have stated the plan is in good shape.

Pension Board Chairman Keith Tanner says the study needs to be performed, because suspicions about the underfunded pension plan have continued to grow and its members want closure on what caused the issues.

But Feder questioned Benchmark founder Edward Siedle for 45 minutes and explained why he thought Siedle and his company were inappropriate to perform the investigation.

Feder cited an Oct. 19 e-mail sent from Siedle to Tanner’s personal e-mail address.

In the e-mail, Siedle wrote: “I am writing to report my concerns about the Longboat Key firefighters retirement plan. I must bluntly report that I see numerous red flags indicating serious fiduciary breaches in the preliminary information I have reviewed about the firefighters’ plan. In fact, I believe it would be a fiduciary breach for your board not to take prompt action. In light of the severity of the issues involved, I suggest that you advise federal and state regulators at the outset of any investigation the fund undertakes.”

Feder said that he found the e-mail shocking.

“What led you in that e-mail to say those things?” Feder asked.

Siedle only responded that he notices several red flags, adding that investment consultant Morgan Stanley was one of his concerns.

“I don’t need to look at all the documents of a fund to determine whether they are red flags,” Siedle said. “I know you are new to this business, but a lot of this (fund) is public knowledge.”

Feder told Siedle he couldn’t believe he was suggesting that the board make contact with state and federal regulators to alert them to a pending investigation.

“I believe what you wrote can cost funds money,” Feder said. “I don’t believe you had the knowledge that would lead someone to run to the Security Exchanges Commission and other agencies before they even had an investigation performed.”

Pension trustee Shannon Gault agreed with Feder.

“It seems if something is wrong, that’s the time to advise authorities rather than stirring something up,” Gault said.

Feder asked Siedle four times if he has already made conclusions about the pension plan.

Siedle said that his report would be based on the evidence received from public records requests and financial documents.

“I would never have my opinions trump evidence,” Siedle said.

Feder, however, said he believes the investigation is a bad idea.

“I believe you cannot overlook the potential impact of your own words that were written before you are fully aware of the fund with which you are talking about,” Feder said. “Get someone who doesn’t come in with a preconceived notion of red flags.”

Siedle, who said he’s referred to as a “pension detective,” began his career in the 1980s as a Washington money manager and, later, as the member of a legal counsel for Putnam Investments money-management firm.

In 1989, Siedle founded a series of firms specializing in pension funds and money management for municipalities.

“We dig deeply into the management of money to identify conflicts of interest and other forms of malfeasance,” Siedle said. “The firm uses due diligence techniques to get a complete picture of what’s going on and how it impacts investment returns. The purpose is to have the fund operate at a higher fiduciary standard.”

Siedle said it could take less than 90 days to complete the pension investigation.

“It’s not a criminal investigation,” Siedle said. “The report will read like any report with no wild conclusions that aren’t supported.”

Pension target: Morgan Stanley
A list of information requested by Benchmark President Edward Siedle dated Jan. 4 shows that the pension investigator believes if there is any wrongdoing or money to recover from the Firefighters Pension Board fund, it will most likely come at the hands of pension consultant Morgan Stanley.

Benchmark’s 14 bullet points request copies of all contracts between the fund and Morgan Stanley or any other agents working on behalf of Morgan Stanley. Benchmark also requested any documentation reflecting the execution of trades regarding the fund’s accounts.

Siedle told the Longboat Observer his company has recovered $10 million for a Nashville, Tenn., public-pension fund and $6 million from a Chattanooga, Tenn., public-pension fund. Siedle said his company is also working to recover $20 million from a Burlington, Vt., public-pension fund.

All three of those funds, Siedle said, involved recovering the money from Morgan Stanley, which is the investment consultant for those funds.

Documentation from Benchmark’s website, benchmarkalert.com, shows that pension funds with conflicted investment consultants typically underperform by 1% to 2%.

Contact Kurt Schultheis at kschultheis@yourobserver.com
 

 

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