Thursday, September 26, 2013

Report: SEC investigating Atlanta's employee pension fund

Posted By on Thu, Sep 26, 2013 at 1:28 PM

The U.S. Securities and Exchange Commission is reportedly looking into whether $65 million of Atlanta's pension fund was improperly invested.

According to WABE, federal investigators are seeking information from City Hall employees and pension board members about Larry Gray, an adviser for the city's $2.5 billion fund. The investigation stems from a January complaint alleging that Gray recommended the cash be invested into a pension fund he owned without disclosing his conflict of interest.

Mayor Kasim Reed, who in recent weeks has touted his effort to overhaul the city's pension programs, told WABE last month the claims "troubled" him. The station briefly spoke with him again yesterday:

For now, Reed is under strict orders not to discuss the SEC investigation, but he said he was cooperating with federal officials.

"I'm never concerned about the federal government getting involved because at the end of the day I believe that light is the best antiseptic. All we're going to do is cooperate," said Reed.

Angela Green, a former City Hall employee and Board of Trustees member of the city's General Employees Pension Plan, filed a complaint with the SEC this past February. Atlanta Progressive News reported then about the claim:

The complaint, filed on January 18, 2013, alleges that the investment consultant for the Pension Fund, Larry Gray, steered some 28 million dollar investment from the Pension Fund into a hedge fund company that he owns, without full disclosure to the Board of the conflict of interest.

Green alleges that at the November 07, 2012 Meeting of the Board of Trustees, that Gray presented to the Board several alternative investments for the Board to consider, one of which is a company called GrayCo Alternative Partners II, LP.

As it turns out, the sponsor of "GrayCo Alt II" is Gray & Company, the same company that provides consulting services for the Pension Fund. Larry Gray is the President and CEO of Gray & Company.

The Board voted seven to two approve the contract, with Angela Green and Greg Nash voting against, according to the November 07, 2012 meeting minutes obtained by APN.

This summer, Atlanta Chief Financial Officer Jim Beard told the AJC he didn't think Gray's investment was problematic, commenting that having Gray's "skin in the game" could make the investment worthwhile.

In a statement, Reed says he took action in mid-August to address "potential conflicts and lack of disclosure" involving Gray. Beard followed by asking the pension board to issue an addendum to the General Employees' Pension Fund RFP for advisory services, which is still open, that would require full disclosure of "any and all professional or financial interest that could create a conflict, perceived or real." Said the mayor in a statement:

"Since September 16, City of Atlanta Human Resources Commissioner Yvonne Cowser Yancy, my designee on the pension boards, has been requesting a special called meeting of the General Employees' Pension Fund board to consider the Board's options to eliminate conflicts, or any appearance of conflicts, and address concerns surrounding the financial management of current advisory and alternative investment agreements. This meeting is scheduled for Thursday, September 26 at 11 a.m."

We've reached out to see how today's meeting went and will post an update once we hear more.

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