PSPRS, Desert Troon, The FBI, & The SEC

Pensioners First – News articles and public meeting notes have reported that the U.S. Attorney’s Office, the Federal Bureau of Investigation (FBI), and the U.S. Securities and Exchange Commission (SEC) are looking into concerns regarding the Arizona Public Safety Personnel Retirement System’s (PSPRS’) trustees’ and administrators’ decisions relating to property valuations and other investment and accounting-related matters.

 April 2014

The Arizona Public Safety Personnel Retirement System pension discloses that it was the subject of a United States Securities and Exchange Commission investigation

November 2014

The Arizona Public Safety Personnel Retirement System pension, as an organization, is found NOT to have criminal liability by the FBI and the U.S. Attorney’s Office; however, according to news reports, it appears that the Feds continue to investigate certain individuals at PSPRS.

Five articles-

First article:

By Randy Diamond | August 12, 2014

A federal grand jury investigating the $7.9 billion Arizona Public Safety Personnel Retirement System sought several hundred files related to PSPRS’ investments with its largest real estate manager, Desert Troon Cos., and confidential letters the pension fund’s Chief Investment Officer Ryan Parham wrote to PSPRS board members, the subpoena shows.

Judicial Watch provided the document to Pensions &Investments on Tuesday morning.

The vote by the board to release the document came on the same day the board voted 4-2 to give Mr. Parham a two-year contract extension as the pension fund’s CIO.

Mr. Parham, who makes $268,000 a year and is the highest paid state employee in Arizona, will not be getting a raise. But he will receive two $25,000 retention bonuses over the next two years.

Mr. Parham was a key proponent of a plan that increased the value of PSPRS’ portfolio with Desert Troon by calculating the investments at its value based on recovery of the Arizona real estate market, instead of its market value.

The portfolio had declined in value after the collapse of the Arizona real estate market during the recession.

Three of the pension fund’s investment officers and the chief counsel for its investment office all resigned last year over the valuation dispute, maintaining it was improper for the retirement system to calculate the Desert Troon investments at potential future value instead of a market-based appraisal.

The documents requested by the federal grand jury include valuation records regarding appraisal of the Desert Troon portfolio and confidential written investment reports Mr. Parham sent to the PSPRS board between 2010 and 2013. Sources say those reports included Mr. Parham’s comments on the performance and value of the Desert Troon portfolio.

James Hacking, the pension fund’s former administrator, has insisted that retirement system officials acted properly and in the best interests of PSPRS regarding the valuation of the Desert Troon portfolio.

Mr. Hacking was terminated last month over another controversy involving his approval of pay raises for some members of the retirement system’s investment staff without the required approval of the Arizona State Department of Administration.

The documents named in the federal grand jury subpoena are a subset of documents taken from PSPRS by Anton Orlich, one of the investment staffers who resigned over the controversy involving Desert Troon.

The pension fund had filed a lawsuit in Maricopa County Superior Court last October demanding the return of the documents that Mr. Orlich said in legal filings he took to protect them from being destroyed.

Mr. Orlich received a federal grand jury subpoena earlier this year for the documents. But he turned over the documents to the Maricopa County Superior Court for safekeeping as part of an agreement with PSPRS until the legal dispute was settled.

The federal grand jury then subpoenaed PSPRS for the documents related to Desert Troon

Second article:

 Arizona fund hires defense attorney

By Randy Diamond | March 14, 2014 5:59 pm | Pensions and Investments


The board of the $7.7 billion Arizona Public Safety Personal Retirement System’s hired a criminal defense attorney after receiving a federal grand jury subpoena.

The subpoena seeks documents in a criminal investigation into the Phoenix-based pension fund management’s relationship with its largest real estate manager, Desert Troon Cos., sources say.

A request by Pensions & Investments to view the subpoena was denied by Michael Sillyman, a partner with Kutak Rock LLP, Scottsdale, the board fiduciary counsel.

Mr. Sillyman, in a March 13 e-mailed response to the request, said, “Grand jury subpoenas are not public records.”

The board voted to approve the hiring of the criminal defense attorney at a special meeting on March 7, according to sources.

At least three former investment staffers at Arizona Public Safety are cooperating with an FBI investigation of the valuation by the pension fund of around $340 million in real estate assets. The assets are part of a joint venture between Desert Troon and PSPRS, according to sources, documents and interviews.

The three former investment officers resigned last year after insisting senior PSPRS management had ignored accepted guidelines for valuing at fair market value the real estate bought before the 2007-2008 market collapse. Instead, the real estate was given a higher value, based on the price at which Desert Troon expected to be able to sell it after a full recovery of the Arizona real estate market.

A review by the Arizona Auditor General’s Office last year found the pension plan had overstated real estate values. Based on the review, PSPRS administrators chose to write down the real estate by $24.7 million for the fiscal year ended June 30, 2013.

Third article:

Fed grand jury seeks pension documents

Retirement system board hires criminal attorney to handle subpoena

By Craig Harris  – The Arizona Republic/  – March 8, 2014

The pension system for Arizona police and firefighters has received a federal grand-jury subpoena to turn over “a long list” of documents as part of a criminal investigation into whether pension-trust managers inflated certain real-estate investment values to trigger staff bonuses.

The trust board of the Public Safety Personnel Retirement System voted at a special meeting Friday to hire a criminal defense attorney to handle matters related to the grand-jury investigation.

PSPRS officials refused to release a copy of the subpoena to The Arizona Republic despite an assistant state attorney general’s opinion that it is a public document that should be readily released.

A system spokeswoman said Jared Smout, the system’s deputy administrator, made the decision late Friday to withhold the record after the trust previously removed the subpoena from its Phoenix headquarters and gave its only copy to Michael Sillyman, a private attorney from the firm Kutak Rock in Scottsdale.

Sillyman also refused requests from The Republic and the newspaper’s attorney to release the document.

Another Kutak Rock lawyer publicly supported the trust’s decision to report higher real-estate values on its books. Those values are now under federal scrutiny.

Efforts by the U.S. Attorney’s Office to obtain sensitive information comes after the system’s in-house counsel and three high-level investment analysts quit in protest last year because of concerns over the way real-estate values were being recorded. The U.S. Attorney’s Office declined to comment on its probe.

The pension system last week disclosed that it was restating its real-estate portfolio for the end of 2013, reducing the value of the portfolio by nearly $40million, because of accounting errors — including the double counting of some property values — and upon the recommendation of the state Auditor General’s Office.

Marty Anderson, deputy chief investment officer, blamed some of the accounting problems on a former employee but did not elaborate. The system repeatedly declined to disclose the identity of that person.

All three analysts who quit last year told The Arizona Republic this week that they had nothing to do with the accounting problem. One, Mark Selfridge, said he warned the system not to double-count land values before he resigned in mid-July.

The system manages a $7.7billion trust to pay for the retirement benefits of public-safety officers, elected officials and correctional officers. It has more than 53,000 members.

Board Chairman Brian Tobin acknowledged Friday that the system had received the subpoena, but he referred all questions about the probe to Ivy Voss, an assistant state attorney general who represents the trust.

Voss told The Republic that the U.S. Attorney’s Office had requested an extensive number of records by next month.

Voss, who was at Friday’s board meeting, indicated the subpoena is a public record and should be readily available.

The Republic later asked for the document, but trust administrator Jim Hacking said through a spokesman that the system could not immediately release a copy because it no longer was in the hands of any administrators or board members at the trust’s Phoenix headquarters.

Voss said that, 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 federal investigation rests largely on claims made by Anton Orlich, a former investment analyst who took numerous records from the pension system and is now a key witness for the FBI.

When Orlich quit in June, he downloaded thousands of investment documents from the trust’s computer system out of concern that PSPRS management would move or delete them, according to court records.

The system has denied wrongdoing. Last year, it sued Orlich, alleging that he illegally stole proprietary and personal information such as Social Security numbers of pension trust members. Orlich has said he had permission to take the records and has said he was unaware the documents included personal information — and that he never looked at it.

As part of the civil suit in Maricopa County Superior Court, the system obtained a judge’s order to force Orlich to return the documents. Orlich turned them over to the court Jan. 13. But, on that same day, Orlich received a federal subpoena to appear before the grand jury with the records.

With Orlich no longer in possession of the documents, the U.S. Attorney’s Office has used the grand jury to subpoena records from the trust. Voss said the office is seeking all the documents that Orlich took.

The Republic also has battled the agency to disclose records about the matter under the Arizona Public Records Law. The newspaper asked months ago for reports detailing internal disagreements over the valuation of real-estate investments.

The trust board voted last week to turn the reports over to The Republic, but Kutak Rock advised the board not to part with many key exhibits backing up critics’ contentions that the real-estate assets were overvalued to protect top-staff bonuses.

Attorney David Bodney, who represents The Republic, appeared before the trust board Friday to again urge the release of the documents in question. That request was rebuffed by the board.

Orlich, in a deposition obtained by The Republic, said the FBI has interviewed him at least four times about the subject. He has provided information to special agents about potential fraud at the pension system involving its joint-venture real-estate projects and a possible cover-up.

The deposition was conducted by Sillyman, who also asked Orlich questions about the FBI investigation. Orlich told Sillyman he was made uncomfortable by Sillyman using a deposition in a civil suit to “find out questions about a criminal investigation into Kutak Rock and PSPRS.”

An FBI spokesman said Friday that the agency would neither confirm nor deny it had interviewed Orlich and that it would not divulge information about any investigation. Sillyman did not respond to a request for comment.

The Republic has learned that the FBI since at least December has been interviewing Orlich and other former trust employees along with Levi Bolton, executive director of the 13,000-member Arizona Police Association. Bolton triggered the investigation in mid-September by requesting 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 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 Cos.

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. System officials said the bonuses provided in 2012 were unrelated to realty values.

The board voted to end the bonus program in September after the newspaper’s story and negative political attention spurred by the payouts.

Fourth article:

FBI investigating pension trust for Arizona safety personnel

Pension trust in federal inquiry

By Craig Harris The Republic | Tue Jan 21, 2014

The U.S. Attorney’s Office has begun a federal grand-jury investigation into the Public Safety Personnel Retirement System, while the FBI is examining allegations that trust managers improperly inflated the values of poor-performing real-estate investments, The Arizona Republic has learned.

The FBI, since at least December, has interviewed former trust employees along with Levi Bolton, executive director of the 13,000-member Arizona Police Association. In addition, at least one federal grand-jury subpoena has been issued for high-level PSPRS documents related to a specific real-estate investment.

The $7.7 billion trust finances the pensions of more than 52,000 people in three state retirement plans: the Public Safety Personnel Retirement System, the Elected Officials Retirement Plan and the Corrections Officer Retirement Plan.

System Administrator Jim Hacking was traveling out of the country and could not be reached, but Christa Severns, a trust spokeswoman, said Tuesday that no one at PSPRS had been officially notified about the investigation.

Deputy Administrator Jared Smout said Tuesday that he knew of no one who had received a target letter from federal officials naming them as subjects of an investigation. Calls and e-mails on Tuesday to all seven PSPRS board members went unanswered.

Neither the FBI nor the U.S. Attorney’s Office would disclose what they are investigating.

Bolton said Tuesday that he was interviewed last month by two FBI agents, one of whom specialized in forensic accounting.

He said he believes the federal investigation began after he requested a criminal probe in mid-September into “the conduct of PSPRS management.”

At that time, Bolton said, he became concerned about the trust’s financial dealings after reports in The 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 Cos.

Bolton’s letter, originally sent to the Arizona Attorney General’s Office and then transferred to federal investigators, came after four high-level employees — including the trust’s in-house legal counsel — quit in protest because they believed the assets had been overvalued. Two of those employees recently acknowledged they had been interviewed by the FBI. Another would neither confirm nor deny such an interview took place, while the trust’s former attorney said he had no comment.

A key concern of the former employees was whether the inflated values enhanced certain staff bonuses.

The Republic in August disclosed that the trust gave performance and retention bonuses to its highest-paid staff. It also reported that staff received guaranteed raises the previous five years, at a time when taxpayers were bailing out the financially troubled pension trust.

Five- and six-figure bonuses and additional pay were awarded to managers and investment staff even when the trust posted financial losses in 2008, 2009 and 2012. The trust’s board in September voted to end the bonus program following the newspaper’s story and negative political attention spurred by the payouts.

Desert Troon manages a portfolio of retail, residential and commercial real-estate properties for the trust and was paid at least $12 million in fees in 2012, according to trust records. The company, which reported at least $103 million in losses on trust investments in fiscal 2013, did not return a call seeking comment.

Trust documents

Anton Orlich, a former trust investment manager and one of the four staffers who quit last year, has been ordered to appear before a federal grand jury on Feb. 11 to turn over investment-related electronic documents he took from PSPRS when he quit, court records indicate.

Those same documents are the focus of a civil suit filed against Orlich in Maricopa County Superior Court by PSPRS seeking their return. Court records in that case say the FBI has confirmed to Orlich’s attorney that Orlich is neither the “target or subject of the grand-jury investigation.”

Court records indicate Orlich, who quit in June, took the documents because of his concern that PSPRS management would move or delete them. The records state that he wanted to protect trust beneficiaries, other staff members and himself.

In an interview with The Republic, trust attorney Michael Sillyman alleged that Orlich took more than 3 million pages of documents containing records involving Desert Troon, trade secrets, privileged information and sensitive personal records such as Social Security numbers, phone numbers and addresses of trust members.

Sillyman works for the firm Kutak Rock, which offered legal advice on some of the Desert Troon transactions. Sillyman said the trust intends to file a motion to quash the grand-jury subpoena, claiming Orlich stole the documents that federal investigators now seek.

“If the FBI needs documents from PSPRS, they can subpoena them directly,” Sillyman said Tuesday. “I can’t imagine why they would want member information.”

The trust’s Superior Court suit against Orlich alleges he improperly removed the records.

Orlich’s attorney claims he had permission to take the records.

Superior Court Judge Thomas LeClaire on Jan. 8 ordered Orlich to turn the records over to the court, and Orlich did so on Jan. 13. But that same day, Orlich received the federal subpoena to appear before the grand jury and to bring the same records.

Lynne Adams, Orlich’s attorney, is now asking LeClaire to release a hard drive and three other electronic storage devices so her client can comply with the federal subpoena.

“Mr. Orlich believes that PSPRS filed this suit against him in an attempt to distract attention from its management and potentially remove any documentary evidence of those decisions and conduct,” Adams wrote in her request for the documents to be released.

Adams, in the court filing, said the FBI recently asked to meet with Orlich to discuss his concerns regarding PSPRS management. During that meeting, Orlich met with a special agent and a forensic accountant.

An FBI spokesman would neither confirm nor deny an investigation was ongoing.

A spokesman for the U.S. Attorney’s Office declined to comment, saying it would be inappropriate to discuss an ongoing investigation.

Others interviewed

The FBI also met recently with Mark Selfridge, a former PSPRS real-estate manager who quit during the valuation controversy.

Selfridge said the interview dealt primarily with trust investments in Desert Troon.

Selfridge declined to answer additional questions.

Paul Corens, another trust portfolio manager who quit, would not confirm or deny that he talked with the FBI. In his resignation letter to the board last year, Corens said he “resigned due to the unethical practices perpetuated by executive management that I personally experienced over the course of several years and that culminated in early 2013 with the Desert Troon valuation process.”

The Republic obtained Corens’ resignation letter and other documents involving those who quit, through a public-records request filed with the trust.

Andrew Carriker, the former trust attorney who quit, said he could not comment because of attorney-client privilege issues involving his former employer.

Bolton, the head of the Arizona Police Association, said he, too, was interviewed by the FBI. He has not been called to appear before the grand jury. Bolton reiterated Tuesday that only a criminal investigation will reveal what has occurred at the trust.

The controversy over valuations in Desert Troon properties prompted 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 the values by $24.7 million.

However, the Auditor General’s Office did not interview Orlich as part of its investigation, according to his attorney.

Fifth article:


Letter to the Arizona Attorney General

AZ Police Assoc. wants criminal investigation into pension board

Posted: Sep 25, 2013 6:03 PM MST Updated: Oct 09, 2013 6:25 PM MST

By Jason Barry

PHOENIX (CBS5) – The director of the Arizona Police Association wants answers.

Levi Bolton wants a criminal investigation to see if the retirement funds of police and firefighters have been grossly mishandled.

“Would you give the captain who ran your ship into the rocks a performance bonus?” asked Bolton. “Probably not.”

Bolton has just sent a letter to the state attorney general’s office requesting a criminal investigation into the conduct of board members with Arizona’s Public Safety Personnel Retirement system.

The board of trustees has been giving out lucrative bonuses to its investment staff, while the trust was posting huge financial losses from 2008 to 2012.

Concerns have also been raised about administrators recording higher values on real estate investments, rather than reporting lower values as determined by an independent appraiser.

“One thing that is a clue to nefarious behavior, or at least conduct that certainly is suspicious, is an attempt to cover it up,” said Bolton. “When I see that, that is a problem.”

CBS 5 went to the board of trustees annual meeting Wednesday to get some answers.

Board Vice President Greg Ferguson said that they are currently investigating the allegations of mismanagement, but he does not believe they have done anything wrong.

“We went out and hired an independent law firm to come in and look at our process,” said Ferguson. “We think there is nothing wrong with the process. We’ve had auditors look at it and we have nothing to hide. We think we are doing everything correctly.”

The board voted this week to end the practice of giving bonuses to its investment staff, which should save taxpayers more than $200,000 this fiscal year.

No word yet on whether the attorney general’s office will launch an official investigation.

About the Arizona Police Association (APA)-

APA Mission:

The Arizona Police Association (APA) is “an association of associations.” The APA is not “an employment organization, nor is it a “Fraternal Organization.”

Through the combined effort and strengths of our member organizations, the Arizona Police Association is able to provide, at a very low cost, one large, amplified, law enforcement “voice” within our community. The main function of this “voice” is to effectively communicate with and lobby the state legislature, our federal representatives, and when needed, local city and town councils, board of supervisors and individual employers. This communication and lobbying is focused upon the issues affecting the working law enforcement officer, whether these issues concern retirement benefits, adequate pay, adequate equipment, due process rights, effective law enforcement legislation, or the ability of law enforcement officers to be treated fairly. Additionally, when circumstances warrant it, the Arizona Police Association will utilize its “voice” to publicly address issues that are of concern to our individual member groups or the organization as a whole. Publicly addressing these issues can come in the form of joint press conferences, press releases, public appearances and public education through our Website at


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