Arizona PSPRS Pension Subpoenaed By U.S. Attorney’s Office
Fed grand jury seeks pension documents
Retirement system board hires criminal attorney to handle subpoena
By Craig Harris The Republic | azcentral.com Fri Mar 7, 2014 2:48 PM
The pension system for Arizona police and firefighters has received a federal grand jury subpoena to turn over documents as part of a criminal investigation into whether pension-trust managers inflated certain real-estate investment values to trigger staff bonuses.
The Public Safety Personnel Retirement System’s board voted at a special meeting Friday to hire a criminal defense attorney to handle matters related to the grand jury investigation. The board did not name the attorney during its meeting
Board Chairman Brian Tobin referred all questions about the probe to Ivy Voss, an assistant state attorney general who represents the trust. Voss told The Republic that PSPRS had received a lengthy subpoena requesting investment records.
Trust Administrator Jim Hacking said through a spokesman that the system could not immediately release to The Republic a copy of the subpoena because it no longer was in the hands of any administrators or board members at the trust. Instead, it was given to a private attorney at the firm of Kutak Rock, a contractor also providing legal advice to the board.
Voss said to her knowledge no employees at PSPRS had received “target” or “subject” letters from federal prosecutors. Such letters usually are sent to individuals targeted by or the subject of criminal investigations.
The FBI since at least December has been interviewing former trust employees and Levi Bolton, executive director of the 13,000-member Arizona Police Association, who in mid-September requested a criminal probe into “the conduct of PSPRS management.”
At that time, Bolton said, he became concerned about the trust’s financial dealings after reports in The Arizona Republic and other media outlets raised questions as to whether the retirement system accurately stated the value of its real-estate portfolio managed by Scottsdale-based Desert Troon Companies.
The valuation controversy resulted in the resignations last year of the trust’s own in-house counsel and three high-level investment staff members. They quit in protest after raising concerns to management and the board about how land values were reported.
The Republic in August disclosed that the trust gave performance and retention bonuses to its highest-paid staff and that five- and six-figure payments were given to investment staff even when the trust posted financial losses in 2008, 2009 and 2012. Trust officials say the bonuses given in 2012 had nothing to do with real-estate values.
The trust’s board, all of whom were appointed by Gov. Jan Brewer, voted to end the bonus program following the newspaper’s story and negative political attention spurred by the payouts.
The controversy over valuations in Desert Troon properties prompted Jim Hacking, the trust’s administrator, to call for an investigation last year by the Arizona Auditor General’s Office. That probe found the trust overstated values by $24.7 million.
The trust last month also disclosed additional problems in how it reported its real estate assets, and it restated its real estate portfolio by reporting a $39.7 million loss from November to December.