At this week’s Shelby County retirement board meeting, board members didn’t appear likely to support any changes to the county’s arrangement with Memphis-based Consulting Services Group, the investment adviser to the county’s pension fund.
It remains to be seen what the effect will be of news about CSG reported by Bloomberg the day after Tuesday’s meeting. CSG was told about a month ago by the U.S. Securities and Exchange Commission the agency is poised to bring civil charges against the Memphis firm, according to the Bloomberg report.
The SEC sent CSG a Wells Notice, which is a formal alert the federal agency soon will bring a civil enforcement action. Upon receiving the Wells Notice, a firm like CSG would still have a chance to convince representatives of the SEC there’s not enough evidence to bring a case in court.
CSG told the county’s chief administrative officer – who was at this week’s pension board meeting – about the Wells Notice, according to Shelby County mayor A C Wharton Jr. Both Wharton and county CAO Jim Huntzicker knew about the Wells Notice, but neither they nor CSG representatives said anything about it at the meeting.
When asked by one pension board member to elaborate in general on any pending legal action against the firm, CSG co-founder Fred Hodges was blunt.
“We haven’t been charged with anything,” he said.
Hodges added that the company has “never paid as much as a pack of gum to buy an account” and that the company has had three problems with regulators. He did not include the Wells Notice in that list.
Recent critical press coverage of CSG has followed several high profile episodes of late involving the company, including its link to the outer edges of the so-called “pay to play” pension consulting scandal unfolding in New York.
A complaint filed in March by the SEC against two political figures in New York says CSG was approached to pay “what amounted to a kickback demand” to get additional business from New York’s retirement fund.
“I get very emotional about this,” Hodges told the county’s pension board. “The relationship we’ve got down here is very important. How were we to know the New York trustee might be a crook? Or that the chief investment officer might be on the take?”
The day before Bloomberg reported news about the Wells Notice, the county pension board expressed satisfaction with the company and criticized the recent media scrutiny, including an article in the June issue of Forbes magazine titled “Tainted Pension Fund Advice.” That article noted a litany of supposed red flags surrounding CSG’s arrangement with the county.
The general consensus around the table in the mayor’s eighth floor conference room in the County Administration Building was that CSG has served the county well, helped the county’s pension fund perform successfully and that should be what mattered most.
Wharton told the board the group nevertheless will be voting on several items at its August meeting to clear up some lingering questions.
“I still feel there’s a need for the board to have access to a greater level of independent expertise,” Wharton told The Daily News. “I want to go on record on this: performance is not the only indicator. If performance had been the only important barometer, then Bernie Madoff should not be in jail. His investments were performing.”