Pension’s Mark Steed: Staff Had No Confidence in Chief Investment Officer Ryan Parham

Pensioners First – Highlights of the April 19, 2014 Arizona Republic article regarding Mr. Mark Steed’s memo:

  • PSPRS’ Investment Department Chief of Staff Mark Steed wrote a scathing memo to Administrator James Hacking on May 24, 2013, while he was appointed as the Acting Chief Investment Officer (according to the May 2013 Board of Trustees minutes)
  • Chief of Staff Mark Steed’s memo states that a majority of the investment department staff wrote the letter because they had no confidence in the Arizona public safety pension’s Chief Investment Officer (CIO),  Mr. Ryan Parham
  • The law firm of Lewis and Roca and attorney Melanie Pate was hired by the Board of Trustees to investigate investment department staff concerns, but the contents of that report and the results of the investigation have never been disclosed.  According to the Republic, pension administrator Jim Hacking refuses to provide the report to the Arizona Attorney General’s Office and the Arizona Department of Administration
  • The Arizona Attorney General’s Office and the Arizona Department of Administration have begun investigating the issues at the Public Safety Personnel Retirement System
  • According to the Republic, the U.S. Attorney’s Office and the FBI continues to investigate potential criminal actions by the pension’s management and Board of Trustees

Previous news articles include:

  •  East Valley News’ January 30, 2014, article noting that the Public Safety Personnel Retirement System’s CIO Ryan Parham is the highest paid Arizona State government employee (Pensioners First doesn’t think the taxpayers are getting what they are paying for):

AZ Republic

http://www.azcentral.com/story/news/politics/2014/04/20/psprs-workers-pension-retaliation/7930489/

Rose Law Firm

http://roselawgroupreporter.com/2014/04/pension-fund-workers-say-bosses-retaliatory/?utm_source=Rose+Law+Group+Reporter+Newsletter&utm_campaign=ea17a2f573-7-9-13+Newsletter&utm_medium=email&utm_term=0_0fa483909f-ea17a2f573-32165785

 

Pension-fund workers say bosses were retaliatory

Craig Harris, The Republic | azcentral.com April 19, 2014

The state Attorney General’s Office and Department of Administration are investigating whether employees faced retaliation at the Public Safety Personnel Retirement System, the pension trust for police officers, firefighters and elected officials.


State officials declined to identify those who complained, but PSPRS has been battling allegations that top management hounded a handful of workers last year as they raised questions about trust real-estate investments.


Jeff Grant, DOA deputy director, told The Arizona Republic that “charges of discrimination and retaliation have been filed against PSPRS,” triggering the joint inquiry. The Attorney General’s Office declined comment. Grant declined to say who is under investigation.


Meanwhile, The Republic recently obtained an internal PSPRS memo written last year by the system’s chief of staff [PSPRS Investment Department Chief of Staff Mark Steed] in which investment employees accused top managers[ CIO Ryan Parham and Deputy CIO Marty Anderson – according to the July 19, 2013, Pensions and Investments article]  of punishing them for dissenting opinions, so much that it posed a risk to the trust. A key issue was the true value of trust real-estate assets managed by Scottsdale-based Desert Troon Cos.

Questions raised by employees spawned a federal criminal investigation into whether trust officials used inflated real-estate values to trigger staff bonuses. Trust officials have denied the accusations.


Mark Steed, system chief of staff and lead portfolio manager, laid out investment staff’s concerns about management retaliation in a May 24, 2013, memo to Administrator Jim Hacking.


The memo, written about eight months before it became publicly known that the FBI had launched a criminal investigation into the retirement system, said the investment staff had no confidence in the trust’s chief investment officer.


The FBI became involved after the 13,000-member Arizona Police Association alleged in September that trust management had attempted to cover up investment losses.


Trust officials disclosed last month that the system had received a federal grand-jury subpoena seeking documents related to some of the trust’s real-estate investments. The U.S. Attorney’s Office declined comment. The FBI had no comment. At least two former trust employees and the police association’s executive director have said FBI agents interviewed them.


Steed’s memo gives voice to at least four former PSPRS employees’ claims that staff were pressured not to discuss or question management’s valuation of ­Desert Troon-managed properties. It occurred as the fund was trying to restore its financial health. Steed’s memo was copied to the investment staff and Internal Audit and Compliance Officer Bridget Feeley.


Three portfolio managers and the trust’s in-house counsel resigned within four months after the Steed memo was sent to Hacking. Those employees quit because they believed they were being prevented by top managers from fulfilling their fiduciary responsibilities. Among the concerns were allegations that trust management improperly recorded inflated real-estate values from a money-losing partnership with Troon, triggering staff bonuses that were based on the growth in the value of assets.


Trust officials have denied any wrongdoing. “Pursuant to the complaints made by previous system employees, an independent review was conducted by a law firm that specializes in human resources. The board received the results and continues to follow up on the issues,” they said in a statement.


Those results are detailed in a report prepared by Melanie Pate, a former Arizona assistant attorney general now with Lewis Roca Rothgerber. The retirement system, citing attorney-client privilege, refused The Arizona Republic’s request to read the document. The Arizona Department of Administration, which investigates harassment complaints, asked to have Dennis Carpenter, chief counsel for the Employment Section of the Attorney General’s Office, review it.


Hacking issued a statement Friday saying Carpenter was allowed to see the report. DOA officials dispute that.
“By not receiving it (the report), that caused us to move forward with the Attorney General’s Office,” Grant said.


A nearly 5-month-old request from Hacking to raise the pay of the remaining investment staff, including Steed, remains on hold while the investigation unfolds, he said.


The pay raises were sought to replace a bonus system the board halted in September after The Republic disclosed that five- and six-figure bonuses were awarded to managers and staff, even in years the trust lost money.
PSPRS building


PSPRS board has reviewed the concerns of staff and gave administrator and chief investment officer contract extensions.


Financial losses
Steed’s memo describes a May 20, 2013, meeting of nine investment staff members, including the four who later quit. All but one person — Deputy Chief Investment Officer Marty Anderson — agreed that “management punishes team members for dissenting opinions,” according to the memo.


The memo refers to the valuation controversy, and adds that investment staff had been unable to “perform their fiduciary duty for fear of retaliation.”


The trust has experienced financial losses for several years from investments in Troon-managed properties, records show. The roughly $7.7 billion system reported a nearly $110 million loss in value for Troon-managed investments for the year that ended June 30, 2013.


The system restated its books in November after the Arizona Auditor General’s Office found the trust overstated the values of its Desert Troon portfolio by $24.7 million.


Desert Troon President Dan Smith said the media have reported “a lot of inaccuracies” about his company and the pension system, but he declined to disclose them. He said the company is doing its best to support the system.


Steed’s 1½-page memo criticizes Hacking and questions Chief Investment Officer Ryan Parham’s conduct.


Parham, Hacking, Steed and system Chairman Brian Tobin declined to discuss it or answer written questions.


Investment staff relayed their concerns to the seven-member trust board.
The board extended the contracts of Hacking and Parham. Last December, it voted to extend Hacking’s employment contract to June 30, 2015. He is paid $234,000 a year.


Hacking told the board in January that Parham’s performance review was “very positive.” He sought a two-year extension for his top assistant. Parham, who supervises the investment staff, has negotiated many Desert Troon real-estate deals and received $480,997 in extra pay and bonuses from 2008 to 2012.


Parham, who has a $268,000 base salary, is set to receive a $75,000 retention bonus in September [ according to the Goldwater Institute and State of Arizona records, Chief Investment Officer Ryan Parham is the highest paid employee of approximately 38,000 state employees]. A divided board voted to extend his employment to September 2016, but the terms have not been finalized.


Andrew Wilder, Gov. Jan Brewer’s spokesman, said she had not seen the memo and does not comment on ongoing criminal investigations.


“While PSPRS board members are nominated by the governor, it is not a cabinet agency. Consequently, it doesn’t receive the same oversight or management from the executive branch that some agencies or boards otherwise have,” Wilder said. “The Governor’s Office has every expectation that DOA is doing all that is required by law to see that PSPRS adheres to all policies and requirements obligated under personnel reform.”


Fear of retaliation
Staff concerns outlined in Steed’s memo resulted in the system hiring Pate last summer to conduct an internal investigation. It paid her firm $124,133. Trust records show that Pate discussed her findings in August with the system’s board, but no action was taken. Pate did not return a call.
Mark Selfridge, a former real-estate portfolio manager for the trust who quit last July, informed board members soon after that he was concerned the investigation was not independent and that Pate was consulting with Hacking, according to a public record.


Selfridge told the board that he resigned “due to stress I was feeling and out of fear of retaliation by senior management.” In that letter, Selfridge said he overheard a conversation in which Hacking called Pate’s interviews of staff “interrogations” and that Pate had put another employee, in-house counsel Andrew Carriker, “in his place.”


Steed’s memo refers to Hacking punishing Selfridge after the real-estate portfolio manager sought information from Desert Troon. Selfridge, in a recent phone interview, said he was trying to get information from Troon on real-estate sales and whether the company received incentive payments from the trust.


At the time, Selfridge was the third employee to have quit within a few months. The first was Anton Orlich, an investment analyst who resigned in June and has since become a witness in the FBI’s investigation. Carriker  [former in-house Chief Investment Counsel Andrew Carriker] resigned in July, writing that Hacking retaliated against him and made false accusations.


In September, investment analyst Paul Corens quit “due to unethical practices perpetrated by executive management,” his letter to the board said.

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2 responses to “Pension’s Mark Steed: Staff Had No Confidence in Chief Investment Officer Ryan Parham”

  1. Disgusted says :

    When I read this:

    Trust officials have denied any wrongdoing. “Pursuant to the complaints made by previous system employees, an independent review was conducted by a law firm that specializes in human resources. The board received the results and continues to follow up on the issues,” they said in a statement.

    And then I read this in the same article:

    Steed’s memo describes a May 20, 2013, meeting of nine investment staff members, including the four who later quit. All but one person — Deputy Chief Investment Officer Marty Anderson — agreed that “management punishes team members for dissenting opinions,” according to the memo.

    I can’t help but think that the Board is participating in a cover up. Clearly the complaints were made by former AND EXISTING employees. 8 out of 9 people! The one person who didn’t agree was probably a manager engaging in retaliation. The Trustees have failed in their responsibilities to the public.

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