Monday, October 27, 2014

"$30 Billion Unaccounted for in North Carolina State Pension Plan"

"The State Employees Association of North Carolina and Benchmark Financial Services announced today the filing of a complaint with the U.S. Securities and Exchange Commission’s Office of the Whistleblower after a forensic investigation found $30 billion (35 percent) unaccounted for in North Carolina’s Teachers’ and State Employees’ Retirement System (TSERS).

...SEANC and Benchmark released a forensic report detailing a number of potential violations of state and federal law, as well as other concerns regarding the management of the $87 billion pension fund by State Treasurer Janet Cowell.

...The nation’s seventh largest public pension has no audited financials. An audit of TSERS by State Auditor Beth Wood, which would improve oversight and management of pension investments, reveal deficiencies (including fraud and other malfeasance), and produce savings, is decades overdue...

...the Treasurer’s office unable to account for $30 billion, hundreds of millions of dollars in fees paid to money managers not previously reported to the public or the N.C. General Assembly, and what appear to be several violations of state and federal securities law by the Treasurer’s office.

The most egregious of these problems, of course, is the Treasurer’s inability to account for $30 billion of the $87 billion pension fund.

“Nobody has any idea where that $30 billion has gone. It’s all in secret accounts,” Siedle said.

...“This report shows the dangers of the sole fiduciary governance model for the state pension plan and the need for reform,” Cope said. “Not only can State Treasurer Janet Cowell not account for $30 billion, she is refusing to disclose hundreds of millions in fees, as required by law, and her high-risk investment experiments are hurting North Carolina taxpayers, as well as employees and retirees.

SEANC is calling on the General Assembly to take up legislation to reform this system. SEANC also is calling for a full audit and an SEC investigation into Cowell’s management of this $87 billion fund.”

...In an unprecedented decision, Cowell has entered into agreements with a number of Wall Street money managers to keep secret from all stakeholders, including the General Assembly, where $30 billion (35 percent) of pension assets are invested.

...Total Fees to Wall Street Skyrocket to $1 Billion: Benchmark estimates total fees paid to Wall Street money managers have risen 1,000 percent to approximately $1 billion — at least half of which ($500 million) have not been properly reported by Cowell to the General Assembly and the public.

...North Carolina law mandates full disclosure of all direct and indirect investment management and placement agent fees in the Treasurer’s Government Operations reports to the General Assembly.

Cowell has failed to make these disclosures.


...Eliminate the Flawed Sole Fiduciary Governance Structure: There is broad national consensus that the sole fiduciary governance structure for a state pension makes no sense. The current structure of the state treasurer as the state pension’s sole fiduciary should be replaced with fully transparent board with members from the General Assembly, investment experts, state employees and state retirees.

...TSERS local investments through private securities firms and in private corporations based in North Carolina are rife with opportunities for political influence-peddling and dubious economic benefit.

Further investigation is warranted."