$13 million in Kentucky Retirement Systems kickbacks paid since 2004, and the management hides those facts from the board of directors? What would possibly motivate management to do such a thing?
Governor Beshear called for state Auditor Crit Luallen to review the Retirement Systems last week. Yesterday, despite the coverup previously attempted by its management, the Board of Trustees of the Kentucky Retirement Systems voted to second that request for an audit by Luallen:
The Kentucky Retirement Systems will ask state Auditor Crit Luallen to review its use of placement agents, the well-connected middlemen who have collected nearly $15 million in fees since 2004.
The KRS Board of Trustees audit committee on Wednesday voted to ask Luallen to conduct an independent audit, a move that was requested last week by Gov. Steve Beshear. Later, KRS board chairman Randy Overstreet said the full board would take up the audit committee’s recommendation and that he would personally meet with Luallen in the near future to request her audit.
Board members said the credibility of KRS — which provides benefits to state and county retirees — suffered because of public disclosure of the large payments to placement agents, especially while the $12.5 billion fund is struggling to keep up with its pension and health care commitments.
“The numbers we’re talking about don’t wash with someone getting a $900 monthly pension check,” said KRS board member Robert Wilcher.
KRS released an internal audit of placement agents on Aug. 12 that disclosed agents’ names and fees but identified no serious problems, such as financial or political connections to Kentucky officials, which has led to controversies with placement agents at other state pension systems.
The internal audit found nearly $13 million in fees paid as of February; since then, $2 million in additional fees have been uncovered by KRS auditors.
Placement agents are paid by private investment funds to help them sell their products to KRS, not by KRS directly, although KRS then pays fees to the investment funds to cover their expenses.
The KRS board two weeks ago voted to reopen the internal audit for further review after several trustees complained that they were unaware of the large fees until it was reported in the news media. KRS employees held the payment information for six months as they finished their audit.
“When we later learned the amount of the fees, they were big numbers that I think would have caused us to ask more questions,” said KRS board member Jennifer Elliott.
KRS should prohibit placement agents from participating in its investment deals, said KRS board member Christopher Tobe, a Louisville-based investment adviser to other pension funds and a former investment specialist at the state auditor’s office.
KRS pays its own staff members and its private investment managers to find good investment opportunities, Tobe said. There don’t need to be middlemen collecting million-dollar paychecks simply for introducing people at a meeting, which is one reason the Securities and Exchange Commission has considered banning them, he said.
“They’re parasites,” Tobe said. “Placement agents all around the country have been seen as political figures and not adding value to the investment side.”
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Heads do need to roll. But more than you may think- Burnside is just a pawn the real power is Randy Overstreet has been Chairman of the Board of Trustees for 14 consecutive years and yields 95% of the power. He is a former State Police Captain of the E-Town post, but for the last 10 or so years has worked for ABC in State Government. He represents State Police and is running unopposed for his 5th consecutive term this upcoming year
Overstreet Gang is the 5 person Trustee majority ruling KRS. Other 4 are more aligned with the Governor. Overstreets Gang 100% supports Placement Agents and defend the practice. Overstreet, Lang, Reynolds, trustees and senior staff knew of the placement agent practice way before August and chose to keep it secret. The board is split 5 to 4, however the audit committee is 3 to 2 with Governors group in control, the call for Crit was from the audit committee. The full board has not approved, but may be felt forced to.
For a good read on how Placement agents work Read this one first for Blackstone background
http://pageonekentucky.com/2010/08/31/krs-placement-agent-living-the-high-life/
Then read the following posted this afternoon
http://pageonekentucky.com/2010/09/03/krs-placement-agent-audit-could-be-messy/
Kentucky State Employees are represented by Susan Smith and Bobby Henson on the board of Trustees. Both support and defend the use of placement agents and support Chair Overstreet. State Employees should be letting their feelings on these issues be known to their representatives on the board.
KRS does not, and has never paid one placement agent, and Padu knows this. Padu’s comments sound like they are of a KRS Board Member that posts on many of these websites as Piked. Padu has a personal grudge against the board, because he wasnt hired at krs for a couple of key positions.
Padu does not represent any retirees, only himself. He is not elected, but rather appointed to the KRS Board by the exxcutive branch of ky government.
Padu is unprofessional, unethical and breaching his fiduciary duty as looking out for the well being of Ky retirees.
Padu, shame on you for speaking of Mr. Overstreet as you have above…you are a digrace!
Queen Bee, two things–first, the above article with quotes from KRS seems to completely contradict what you are saying on placement agents.
Second, your statements on Padu (whoever that is–I have no idea) seem libelous. I will remove it at Padu’s request, and if required by authorities, will provide the IP address for your post.
I have no idea who you or Padu are, but I have a responsibility to make sure no one is verbally injured by comments.
Bob, your point is well taken. As you say, my statement does contradicts the so called quotes from KRS. As for my comments being libelous, they can not be if they are true.
As for PADU, sounds like you know him.
Chow.
Well, you’ve acknowledged your credibility has problems, so that could be a problem for proving your comments to be true. And proving breach of fiduciary duty with those comments seems problematic too, but that judgment wouldn’t be one I would have to make.
As for your gratuitous and pointless suggestion that I know PADU immediately after I said I don’t know either of you (and have no reason to know either of you), it is an indication that you have issues to deal with. It is possible your conduct (in whatever your role is at KRS ) has put you on the defensive.
By the way, it’s “ciao”, not chow. Ciao is an italian informal way of saying goodbye. Chow is a breed of dog that is generally dumb and mean.
One nice thing about chows:
They tolerate the cold well. Maybe queenie is hinting that soon she will be out in the cold as a result of our favorite auditor’s index finger annointing KRS Staff for misprision.
Ok, if we want to play this way, please go to the attached website, which I have forward to the state auditor and media
http://kyret.ky.gov/investments/policies/placement_agents_policy.pdf#When:14:01:53Z
This is the KRS website, which specifically addresses KRS’s policy with regards to placement agents. It was approved by the investment committee and entire board in 2009. Based upon this type of documentation posted on the internet, the rest of state government could learn from this level of transparency.
This would directly contradict any hint that certain board members did not know about the use of placement agents is totally bogus. And this allegation has been made in several articles.
It is just scratching the surface on your statements about credibility.
As a KY retiree this concerns me: “The internal audit found nearly $13 million in fees paid as of February; since then, $2 million in additional fees have been uncovered by KRS auditors.”
These fees sound excessive.
I look forward to seeing the results of Crit’s review and perhaps reading a few indictments.
I am a retiree as well. $13 million is a lot of money, but what makes me angry is that KERS is BILLIONS of DOLLARS underfunded, due to the state legislature STEALING the contributions owed into the retirement fund.
While the the members of the board of trustees that are elected by retirees, including Mr. Overstreet, are trying to fight this battle, some trustees (primarily those that are appointed by the Governor).
As Representative Larry Hoover on the Mandy Connell show on whas this week, the funding deficit in KERS is the biggest financial challenge to the State of Kentucky (this is per the recording of the program that is posted on the sight). That is a HUGE statement, considering the only issue I hear currently is Medicaid funding…..so our issue is bigger than Medicaid.
I think its getting swept under the rug because they think they can get away with screwing ky retirees. Heck, Larry Hoover said one of the major initiatives should be to eliminate “double dipping”. Double dipping is a spit in the bucket compared to the real issue of funding, and no one is talking about it because they don’t have a solution.
As for the audit, yeah it will probably come up with some “relatively” minor findings (and sitting back from 20,000 feet, $13 million is a small number).
Mark my words, none of these audits will bring out the real issue, which is the general assembly did not fund the pension plan according to the actuarial report’s required funding amount (not even close). I am just wondering when the fund will go bankrupt.
There is a trustee who has said repeatedly that he is the only “qualified investment professional” on the board of trustees. I don’t think I would be saying that too loudly. Where the hell has he been all of these years our pension has not been funded.
But again, I maybe wrong, but I believe he is not a retiree and is appointed by the governor……go figure.
Roy, indictments sound like a wonderful idea. And where I come from, $13 million is worth worrying about. Getting rid of the pervasive attitude of KRS and anything goes, including their rotten self-dealing, middle men and overpaid hack managers won’t solve all the problems, but it’s sure a good place to start.
Remember that deal with the veterinarian and the real estate?
It’s been going on way too long, and long, long, long before Beshear was around.
Bob, you must be one of those who is part of the problem……ignoring the real issue….remember the Blue Ribbon Panel report on the state’s contribution shortfalls? If I remember correctly, the fund could go bankrupt in the next 10 years.
As for pervasive attitude of KRS, you must be in Chris Toby’s “gang”. As for the veterinarian deal, I don’t believe any of the current KRS staff leadership was in place when that deal was made. The current staff had to cleanup the mess they were dealt.
I wonder where payments made to certain trustees to go and speak at conferences on behalf of KRS (without the approval of KRS) came from??? It would be interesting to see if any money managers paid for any of the travel and/or speaking fees, and if so, were any of these money managers recommended to KRS…..now that sounds like pay-for-play.
I sure hope the Securities and Exchange Commission reviews those deals…They may also want to look at the personal assets of all the individuals involved, to see if their lifestyles (houses, cars, etc.) match against their income.
You know, us common folk can’t afford to live in $600,000 homes. Maybe there is a smoking gun there?
Oh, and my statements are not slanderous. The board members in question clearly list on their linked-in page and other propoganda they have put out that says they have done these speaking engagements.
And for the suggestion of wrong-doing, I am making none. I am suggesting that while the “hood is open” at KRS, everyone should be scrutinized, including the trustees.
So in the end, I guess I agree with you Bob….bring the audit on and let’s see what’s there….
You’re apologizing for people who’ve stolen $13 million. I don’t know Chris Toby from Chris Matthews. I do know from reading the papers that Mike Burnside is covering something up. He slithered in to KRS as a place to hide out when the rest of Fletcher’s gang got the boot, and numerous horribly bad things have been done under him. I’ve never met him, or Chris Toby.
I’m one of the people who’ve been paying money into the system that has been being so horribly raided under its current management, and I am suggesting wrong-doing. Returns that a chimp could beat, and self-dealing for years and years. And I repeat: $13 million is a big deal. It is not the money of the current KRS administration officials to treat as their own. And if there are directors or trustees stealing, lock them up along with any management found to be cooking the books.
Look up the difference between slander and libel too.
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