Agency expands probe of public safety pension

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Agency expands probe of public safety pension system

Craig Harris, The Republic | May 6, 2014

The Arizona Department of Administration has expanded its investigation of workplace violations in the Public Safety Personnel Retirement System to include sexual harassment, a record obtained by The Arizona Republic shows.

The ADOA disclosed last month that it was examining charges of discrimination and retaliation at PSPRS following a controversy in which some staff members raised questions about whether real-estate investment values were inflated in order to trigger bonuses.

Now, ADOA Human Resources Director Marie Isaacson has informed an ex-employee that the state was looking into concerns of sexual harassment. Her April 25 letter did not indicate the target.

The Republic last year reported that the retirement system had given a $5,670 bonus to a senior manager despite his having been disciplined in May 2012 for making comments with a “sexual overtone” to a female colleague when he told her to “sit on the copy machine.”

The Republic acquired Isaacson’s letter from one of five people who have filed workplace complaints against the pension system. Jeff Grant, an ADOA spokesman, said Monday that he could not comment or release any documents pertaining to the investigation.

The state inquiry into workplace complaints at the roughly $7.7 billion trust for police officers, firefighters, elected officials and correctional officers coincides with a federal criminal investigation into whether the system used higher estimates of value on real-estate investments managed by Scottsdale-based Desert Troon Cos. to trigger bonuses for certain investment managers.

Jim Hacking, the trust administrator, has denied the allegations, blaming the scrutiny on disgruntled employees who are “motivated by malicious intent, with the allegations made in reckless disregard for the truth,” according to a letter he posted on the system’s website.

Hacking stated that “we believe that these persons knew or should have known that their allegations were untrue at the time they made them.”
Hacking declined Monday to be interviewed. Christa Severns, a system spokeswoman, said the trust was unaware that ADOA was conducting an investigation.

Hacking’s statements in his online letter are similar to language Desert Troon used in a lawsuit it filed last Friday against four former high-ranking PSPRS employees, including the trust’s one-time in-house counsel.
Troon, which is an investment partner with the trust, has sued former PSPRS portfolio investment managers Anton Orlich, Paul Corens and Mark Selfridge and former PSPRS in-house counsel Andrew Carriker.

Severns said PSPRS is not involved in the Troon suit.

The PSPRS employees targeted in the suit quit last year in protest, expressing concerns about how PSPRS was reporting the values of properties managed by Troon.

Troon, which co-owns or manages real-estate projects in Arizona, Colorado, Texas and Utah, accuses the four of engaging in a post-employment conspiracy to defame and falsely disparage senior management at the company and the pension system.

The suit also accuses them of communicating false statements to media members, including The Republic, and of intentional interference with business expectancies, unlawful interception of electronic communications and misappropriation of trade secrets.

The suit says a report regarding Desert Troon that Carriker wrote for the board before he left included “materially disparaging and defamatory statements.” In it, Carriker says Desert Troon has been one of the trust’s poorest performing investments, noting that the pension system had received only a $500,000 distribution from Troon during the previous five years.

The suit seeks an unspecified financial award.

Though there have been accusations that the system used inflated values, trust records show that Troon-managed properties have been among the worst-performing real-estate investments for the system the past few years and that those properties have lost value every year since 2009.

The trust, as of June 30, 2013, lost at least $109 million in real-estate value on nearly $450 million in investments managed by Troon, according to the system’s annual financial records. Overall trust investment losses are a key factor in causing government employers to make larger financial contributions to keep the trust financially sound.

Corens, a former system real-estate portfolio manager, said he had warned the state Department of Administration in writing when he became a whistle-blower that he feared future legal action could occur. He said Troon’s suit is intended to “intimidate me and silence my issues” as well as financially harm him.

Selfridge, also a former real-estate portfolio manager, said that the allegations are false and that the suit is intended to silence and intimidate him.

Orlich and Carriker declined to comment.

Orlich, who also is being sued by PSPRS over records he removed when he quit, has been interviewed numerous times by the FBI since quitting. A federal grand jury has subpoenaed records from PSPRS regarding real-estate valuations. Orlich has said that he took the records out of fear they would be destroyed.

The FBI and U.S. Attorney’s Office declined to comment.


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