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Longboat Key Wednesday, May. 4, 2011 6 years ago

Benchmark's final report targets Morgan Stanley

by: Kurt Schultheis Senior Editor

Benchmark Financial Services released its final report of the Longboat Key Firefighters Pension Board Monday, May 1. The report, which cost the town $50,000, reveals that much of the focus of Benchmark President Edward Siedle’s forensic investigation focused on investment consultant Morgan Stanley.

The main discovery of Siedle’s report, which was outlined in a preliminary report last month, refers to a $209,000 payment made to Morgan Stanley that Siedle doesn’t believe was properly disclosed and investigated in 2004, even though the pension board’s attorney Bob Sugarman brought the matter up at that time.

Siedle made several recommendations regarding Morgan Stanley and suggested the board needs to determine whether Morgan Stanley is in compliance with its transaction agreements, amend its investment policy and appoint a compliance officer to regularly monitor the plan.

“The board should consider whether the quality of custodial services provided by Morgan Stanley is satisfactory,” the report states.

The report, which says Morgan Stanley has not provided Siedle with all the information he requested, states that in the last 10 years, the underperformance of the plan has been 1.25%.

However, Firefighters Pension Board member Shannon Gault points out that a $15,000 actuary study performed by The Segal Group reveals that 67.6% of the plan’s approximately $13 million in unfunded liability is a result of benefit enhancements, salary increases and low turnover rates.

The Segal Group study says only 24% of the $13 million can be attributed to Morgan Stanley and its investment suggestions.

Although Gault and fellow board member Gerald Feder believe the forensic investigation was a waste of money, Gault believes it points out there is no large amount of money the pension board can recover.

“If we were to go after Morgan Stanley for its underperformance of 1.25%, the company would come back to us with an arbitration offer to pay us 1.25% of the 24% in unfunded liabilities that can be attributed to investment losses,” Gault said. “That amounts to only $40,000.”

Gault said she was worried the report would create “a witch-hunt” for lost money that would costs thousands of dollars in legal fees and taxpayer dollars to recover.

“But there just isn’t anything there,” Gault said. “You don’t go after the giant unless you have the ammo. We don’t have the ammo.”

The board will review the report and Siedle’s entire list of recommendations at a special meeting at 9 a.m. Friday, May 13.

Contact Kurt Schultheis at [email protected].

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