It’s a report Bill Gulliford said will cause many to become angry.
At this point, his emotions have shifted. A 143-page forensic dive into the Police and Fire Pension Fund makes the City Council member sad.
“With all the needs in this city I have witnessed in my over four years on the City Council, the revelations in this report are reprehensible,” he said.
READ the full report here.
The public safety pension fund has potentially underperformed by more than $370 million, the report said. Additionally, there’s been poor investment choices and even poorer oversight.
Overall, it’s bad enough that a forensic investigation released Wednesday suggests Gov. Rick Scott reconsider investigating the fund and possibly involving the FBI, Florida Bar and U.S. Department of Justice. Scott previously declined, calling the matter a local issue.
The full extent of the problems highlighted in the 143-page report completed by Edward “Ted” Siedle isn’t fully known.
The fund, Siedle said, didn’t provide or didn’t have key performance evaluations of its plan that would substantiate how it’s done.
Comparing it to a conservative Standard & Poor’s 500 index shows at least $370 million was lost.
Siedle wrote the lack of transparency in the fund earned a “profound red flag.”
“That really means it’s a Code Red situation,” he said. “To refuse to provide even the minimum documents is very alarming.”
If the plan doesn’t have such documentation, that’s even more disturbing, he said.
“We really don’t know what the performance is,” said Siedle.
Council approved subpoenas be issued to the plan to obtain information Siedle didn’t receive. They have been issued, but General Counsel Jason Gabriel declined to say whether they had been served.
Fund administrator John Keane this month said he and the fund handed over the requested documents, if they existed.
Keane didn’t return a call Thursday morning seeking comment on the report.
Siedle said he was most alarmed the plan adopted the highest fiduciary standard, the Employee Retirement Income Security Act of 1974, but failed to meet even minimum state standards.
He said one of the most flagrant violations has been the organization using pension assets to defend itself in court.
All the fiduciaries — the fund’s staff, vendors, lawyers, board members and more — are potentially at fault, but a court would have to decide to what extent, Siedle said.
On the money side, there is the potential to recover some funds. Siedle recommends reviewing the money manager contracts, most of which likely will have to be rewritten.
The reason? Many he found said the money managers weren’t subject to ERISA standards — but the plan is.
From that, money could have been returned to the fund from the managers.
At the point, the issue isn’t over, Gulliford said. The subpoenas are still out and once additional information comes in, he said he wanted to contract Siedle to follow up and further report on the findings.
Siedle received $85,000 for the report issued Wednesday.
Council member John Crescimbeni said he was exploring options with the state that might reel the fund back in under city control instead of being independent.
Gulliford also said he plans to file a resolution asking for Scott’s involvement.
“I’m not stopping here,” Gulliford said.
Highlights from report
• Poor decision-making led to at least $370 million in underperformance losses.
• Failure to scrutinize management fees resulted in excess fees of $36 million over the past six year.
• Lack of transparency of board members generally and during the investigation amounts to a “red flag.”
• Fund administrator John Keane (who recently retired) and two others were enrolled in a pension plan deemed illegal.
• Settled with former investment consultant for $273,696 after failing to heed warnings of conflicts of interest, which may have cost the pension $300 million to $500 million over two decades.
• City Council may ask Gov. Rick Scott to reconsider investigating the pension fund.
@writerchapman
(904) 356-2466