PSPRS’ Hacking and Parham Face Scrutiny

Pension execs face scrutiny

By Craig Harris The Republic | Mon Aug 26, 2013 11:02 PM

The state Public Safety Personnel Retirement System’s board has scheduled a special meeting today to consider the “employment performance” of its two top administrators and review an independent investigation relating to management and staff.

The board, responsible for a roughly $7.2 billion pension trust for public-safety officers, elected officials and corrections officers, is scheduled to go into a closed-door executive session at 9 a.m. at the system’s headquarters in Phoenix.

At issue is the performance of trust Administrator Jim Hacking and Chief Investment Officer Ryan Parham. Members also will be briefed on results of an independent investigation. The board hired Phoenix-based law firm Lewis and Roca to conduct the probe, and the trust has been billed nearly $20,000.

The trust has refused a request from The Arizona Republic to disclose the contents of the report, saying the investigation constitutes private legal advice. A trust attorney, Michael Sillyman, said the purpose of the probe was to investigate “various allegations related to management and staff.”

The trust funds pensions for more than 52,000 members in the Public Safety Personnel Retirement System, Corrections Officer Retirement Plan and Elected Officials Retirement Plan. Slightly more than 31,000 members are current, vested or retired police officers and firefighters.

All three plans are significantly underfunded because of investment losses during the recession and in the early 2000s.

Hacking, who has been the administrator since August 2005, referred all questions to Doug Cole, a trust lobbyist acting as its spokesman. Parham could not be reached.

Hacking, who is paid $234,000 annually, is under contract through June 30, 2014.

Parham, whose yearly pay increases from $254,000 to $268,000 on Sept. 20, is under contract until Sept. 19, 2014. Parham, who became chief investment officer in 2009, also receives a $75,000 retention bonus if he fulfills his contract.

Cole said the system “reviews the performance of its administrators on a regular basis,” but he declined to provide details as to the reason for the special meeting.

Board Chairman Brian Tobin, a Phoenix Fire Department deputy chief, said he legally was prevented from providing details, except to say that the meeting was not in regard to a typical annual evaluation of the two administrators.

Tobin said he did not know if the board will take any action following the executive session.

Real-estate values

The examination of Hacking and Parham comes after senior-level employees accused the trust’s management of inflating the values of key real-estate assets in fiscal 2012 annual reports.

Two portfolio managers and the trust’s chief investment counsel resigned from May 22 to July 15, in the wake of the conflict, and the board has sought counsel from the Arizona auditor general regarding the valuations. That inquiry is ongoing.

Using the higher real-estate values boosted the trust’s bottom line in fiscal 2012 by roughly $90 million, although the trust reported a $54.6 million loss that year.

The trust this year again is considering reporting higher property values quoted by the property manager instead of lower valuations recommended by an independent appraiser.

Using higher land values can enhance bonuses for trust staff. Bonuses are based in part on current-year and historical performances of the trust.

Ire over bonuses

The Republic this month reported that the system gave performance and retention bonuses to its highest-paid staff members during the past five years as taxpayers were bailing out the financially troubled pension trust.

The five- and six-figure bonuses and additional pay were awarded even when the pension trust posted financial losses in 2008, 2009 and 2012.

Roughly $1.4 million in bonuses and additional compensation went to 14 employees from 2008 to 2012.

Hacking, in an open memorandum on the trust’s website, defended the additional compensation, saying, “It is the goal of this system to attract and retain the best and the brightest to manage and administer the trust. … Our challenge is to have a compensation plan that balances employee attraction and retention with careful stewardship of taxpayer dollars.”

Hacking, in an interview last week, said staff again could receive bonuses in September, once the books for the fiscal year that ended June 30 are closed.


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