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VOL. 127 | NO. 62 | Thursday, March 29, 2012

Investment Firm Gets All Clear From SEC

By Andy Meek

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Despite getting a formal alert from the U.S. Securities and Exchange Commission in 2009 that the federal agency might bring a civil enforcement action against the firm, Memphis-based investment firm Consulting Services Group has now been told by an SEC regional office that no such action will be coming.

CSG sent a letter dated March 23 apparently to clients of the firm – addressed “Dear Friends of CSG” – and explains that, while CSG was investigated as part of a broad probe into dealings surrounding New York’s state retirement fund a few years ago, the SEC has now told CSG it does not intend to take action against the Memphis firm.

“We voluntarily and fully cooperated with the SEC in its investigation of the New York State Pension Funds which resulted in 19 different firms either being charged with wrong doing or settling charges,” the letter from CSG reads. “We are pleased to inform you that CSG was not among this group. The Securities and Exchange Commission’s New York Regional Office informed Richard Nummi, CSG’s General Counsel, by letter dated February 28, 2012 … that the SEC’s staff after completing its investigation determined that no enforcement action by the Commission against CSG with respect to its investigation of the New York State Pension Funds was intended.”

Memphis-based investment firm Consulting Services Group receives all clear from SEC.

The formal notice CSG got in 2009 was something called a Wells Notice. It’s an indication the SEC may be poised to take action against the recipient, but it’s not a guarantee. The recipient still has a chance to convince the SEC to change its mind.

CSG found itself caught up on the periphery a few years ago of what became a major so-called “pay to play” pension consulting scandal in New York. A complaint filed by the SEC against two political figures in the state said CSG had been approached to pay “what amounted to a kickback demand” to get additional business from New York’s retirement fund.

Later, Forbes magazine published a scathing article about the Memphis firm titled “Tainted Pension Fund Advice.” That article noted a litany of supposed red flags surrounding CSG’s arrangement with Shelby County, where CSG has served as an adviser to the county pension fund.

However, CSG officials have long maintained what the SEC has now confirmed with respect to the New York matter.

At one particular Shelby County retirement board meeting, CSG co-founder Fred Hodges was blunt. He said the company has “never paid as much as a pack of gum to buy an account.”

“I get very emotional about this,” Hodges told pension board members during that same meeting. “The relationship we’ve got down here is very important.”

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