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Shenanigans At The PSPRS Pension Part Deux

On this very day, one year ago…

The  #$%! Up In The Desert was made public.

                                            – Pensioners First

Dust-up in the desert

Arizona public safety fund is still grappling with a controversy over some real estate investments

Staff and board members of the underfunded $7.9 billion Arizona Public Safety Personnel Retirement System, Phoenix, continue to deal with fallout from questions about real estate valuations and legal matters involving former staff members who questioned those valuations.

Three portfolio managers, as well as the pension fund’s chief investment counsel, resigned between June and October 2013 over valuation of some of the properties in portfolios managed by Desert Troon Cos., Scottsdale, Ariz.

The FBI has interviewed at least two of the former portfolio managers, asking whether senior management had inflated the value of real estate managed in a joint venture between the pension fund and Desert Troon.

Mark Selfridge, a former portfolio manager, said in an interview with Pensions & Investments that FBI agents questioned him about the valuation issues. Anton Orlich, another former portfolio manager, testified in a deposition taken by the pension fund that he, too, was questioned by the FBI.

James Hacking, the pension fund’s administrator, said in a letter to P&I that the valuations used by PSPRS senior management — Chief Investment Officer Ryan Parham, Deputy CIO Marty Anderson and Mr. Hacking — for the Desert Troon portfolios “were reasonable” and “most accurately reflected” the underlying value of the real estate properties.

One month after this article was published, Administrator James Hacking was fired for lying to the Governor about suspended bonuses and hidden pay raises that were a direct result of these employee resignations.

                                                                                                               – Pensioners First

A federal grand jury has subpoenaed PSPRS for documents in connection with the FBI investigation.

The pension fund is suing Mr. Orlich, alleging he improperly took fund documents with him when he resigned. Mr. Orlich insists he had permission to take the documents. In addition, Desert Troon filed suit against the four people who resigned from PSPRS, alleging they made false statements to the media, including P&I, defaming the firm and senior officials at the pension fund.

One thing is certain: PSPRS won’t be entering into any other relationships structured like the joint venture with Desert Troon. Pension trustees voted earlier this year to prohibit PSPRS from investing in any new “joint venture real estate investments.”

Despite repeated written requests and phone calls, Desert Troon CEO Daniel Smith did not comment for this article.

The relationship

PSPRS and Desert Troon formed at least two real estate ventures that remain active today, part of a real estate investment program that Mr. Hacking said in an April 22 letter ”reflected PSPRS’ commitment to investment in the Arizona community.”

The first is DTR1 LLC, which Mr. Hacking said was formed in the mid-1990s. This is the joint venture that Messrs. Selfridge and Orlich said the FBI asked them about.

PSPRS owns between 85% and 100% of each property in the DTR1 portfolio; Desert Troon owns the remainder and manages all of it. The joint venture also contains what Mr. Hacking called “the majority of the … assets” that another real estate money manager, The Pivotal Group, had managed for the pension fund; Pivotal was terminated in 2009.

The second company, DTR1C LLC, was formed in 2009 as a wholly owned subsidiary of PSPRS, the assets of which are managed by Desert Troon. It was formed to assemble, reposition and sell distressed properties; the pension fund is the sole investor. The portfolio includes properties that had been managed by Apex Capital Management which, like Pivotal, had been hurtby the collapse of the real estate market and had poor performance.

The pension fund terminated Apex in 2011 and transferred about $30 million in properties managed by Apex to DTR1C in early 2012. The properties in DTR1C are 100% owned by the pension fund. DTR1C also contains some properties in which Desert Troon gave up its minority interest after the pension fund paid down debt on them, minutes from PSPRS board meetings show.

The assets managed by Desert Troon in both portfolios represented 55.08% of PSPRS’ overall real estate portfolio at the end of fiscal 2008. That dropped to 36.6% at the end of last year.

Overall, PSPRS has made capital commitments and/or investments of more than $550 million with Desert Troon during the 18-year relationship.

Desert Troon manages almost 4.7% of the pension fund’s total assets, according to PSPRS’ June 30, 2013, financial statement.

A report from Bank of New York Mellon (BK) Corp. (BK), the pension fund’s custodian, showed PSPRS’ investments with Desert Troon returned an annualized -6% net of fees on a time-weighted basis for the five-year period ended June 30, 2013. The NCREIF Property index returned an annualized 2.79% for the same period.

Mr. Hacking confirmed the pension fund uses the NCREIF index as a benchmark. But he said for accounting reasons, comparing the returns of DTR1 and DTR1C to that index “will result in material distortions and inaccuracies. Simply put, it is not an ‘apples-to-apples’ comparison.”

Most recent publicized public reports for Desert Troon’s investment performance

• -16.4% One-year performance
• -3.1% Three-year performance
• -4.7% Five –year performance

There appears to be an over-weighting of the real estate portfolio in Desert Troon while the portfolio itself has been consistently underperforming over the past five years.  Regardless, it does appear that the relationship will need to change so that PSPRS can diversify its real estate portfolio and not have its returns so closely tied to a single company. (PSPRS Pension Watch blog)


The value of the two portfolios Desert Troon managed led to a dispute in 2013 over whether Messrs. Parham and Hacking had used the appropriate appraisal methods during the previous four years.

The three former PSPRS portfolio managers — Messrs. Selfridge, Orlich and Paul Corens — and former Chief Investment Counsel Andrew Carriker cited the valuation dispute as a reason for their resignations.

Mr. Hacking acknowledged to P&I that the four men had disputed the valuation and “resigned, ostensibly over this issue.”

The controversy came to light last year after Messrs. Orlich and Carriker began questioning how PSPRS was valuing the Desert Troon portfolios.

The roots of the valuation dispute go back to 2009. That’s when the pension fund began using a market value for all appraisals. The purpose was to provide “meaningful insight into the value of (the pension fund’s) investments” and “specific asset values” in the preparation of PSPRS’ financial statements, Mr. Hacking said in a letter to P&I. (Until then, a cost basis — what it cost to acquire a property — was used.)

But in 2010, Messrs. Hacking and Parham discarded the market-value-based appraisal process. They agreed to Desert Troon’s request that the pension fund use an investment-value-based approach.

The Governmental Accounting Standards Board requires public pension funds’ real estate holdings to be appraised at market value, using factors such as comparable sales or an income approach using discounted cash flow analysis, said William Holder, a former GASB board member and dean of the Leventhal School of Accounting at the University of Southern California, Los Angeles. He is not involved in the PSPRS matter.

For the fiscal year ended June 30, 2012, Desert Troon valued the real estate it managed for the Arizona pension fund using investment value, “to reflect what it fully expected those assets would sell for in the future as the real estate markets revive, especially here in Arizona,” Mr. Hacking said in a July 2013 letter to Arizona Auditor General Debra K. Davenport, requesting that her office evaluate Desert Troon’s valuation methods.

He said Desert Troon used the income approach to analyze future cash flows from the properties, the same method used by independent appraiser Ernst & Young LLC.

But they used different discount rates.

While the auditor general said Desert Troon used a 5% discount rate for lifestyle and retail properties, which were the bulk of the portfolios, discount rates of 7.75% to 20.5% were used for commercial properties.

Ernst & Young, however, appraised every property using discount rates of 7.75% to 20.5%.

The auditor general said the 5% discount rate Desert Troon used for lifestyle and retail properties “may not be consistent with accounting standards.” But the auditor general also said the discount rates used for the commercial properties were ones “market participants would use,” and were appropriate.

As a result, Desert Troon’s appraisals for the year ended June 30, 2012, totaled $303.5 million; Ernst & Young’s appraisals totaled $213.6 million.

Desert Troon’s valuation was used in the pension fund’s financial statements for the year ended June 30, 2012, which led to a dispute the following year among PSPRS investment staff as to what discount rate to use. That disagreement ultimately led to the resignation of the three portfolio managers and the chief counsel.

Mr. Holder said the 5% discount rate was too low to reflect the market value of real estate, as required by the GASB. He said investors in real estate generally use at least 12% to 15% to reflect the speculative nature of real estate investments. He said 5% would be closer to a risk-free rate.

For the fiscal year ended June 30, 2013, Ernst & Young’s valuation was about $82 million less than the approximately $344 million Desert Troon had reported.

Mr. Hacking told P&I that using a market-based valuation would have understated the value of the Desert Troon portfolio by as much as $151 million combined in the two fiscal years ended June 30, 2013.

Valuation issues also surfaced in earlier years. In 2007, the joint venture with Desert Troon purchased Superstition Gateway, a shopping complex in Mesa, Ariz., and tracts of vacant land in other parts of metropolitan Phoenix.

In 2010, the pension fund hired CBRE Group Inc. to appraise the shopping center and land, using PSPRS’ new market-value appraisal policy, Christa Severns, the pension fund’s former external spokeswoman, has said.

Based on the appraisal by CBRE, the pension fund’s entire equity investment of $64.4 million in Superstition Gateway would have to be written down, according to a June 18, 2010, e-mail to Mr. Corens from Desert Troon CFO Daniel Hammons,who questioned the appraisals.

“These values seem criminal,” Mr. Hammons wrote.

That e-mail also said that based on the CBRE appraisal, the pension fund’s entire $31.7 million investment in Terra Verde, a partially completed office park in Scottsdale, would be wiped out.

In an e-mail to P&I, Ms. Severns said pension fund and Desert Troon executives were concerned that the market-based appraisals might have “produced ‘fire sale’ values that would have wiped out the (pension) system’s and DTC’s equity interests in some of those properties.”

“The resulting values could have arguably violated the loan covenants and potentially caused lenders to issue technical loan defaults or at the very least demand principal reductions,” she wrote.

Ms. Severns said after seeing market-based appraisals that showed a severe decline in property values, Desert Troon executives requested the pension fund use the investment-value approach for its joint-venture portfolio.

She said PSPRS’ CIO Mr. Parham then arranged a meeting in the summer of 2010 between Desert Troon and CBRE group officials and both agreed an investment-based methodology should be used to value the properties. And it was.

Mr. Hacking said in his July 2013 letter to the state auditor general that Desert Troon officials had argued in 2010 that it would be unreasonable to report then-current market values for the joint venture, DTR1, since those properties were not going to be sold immediately and could be sold at substantially higher prices in the future.

The properties were ultimately reappraised higher, using investment value, as requested by Desert Troon. The properties — including Superstition Gateway and Terra Verde — were written down by approximately $50 million in 2011.

A 2010 appraisal that valued the properties at about $100 million less using market value was never used. Indeed, for the five fiscal years between July 1, 2009, and June 30, 2013, PSPRS used investment value in appraisals.

In a formal report to the pension fund’s board, Mr. Carriker, the chief investment counsel, contested those valuations. But the board adopted a report signed by Mr. Hacking and PSPRS’ outside fiduciary counsel Marc Lieberman that said the use of investment value calculations was proper.

Last November, the auditor general responded to Mr. Hacking’s July 2013 letter regarding the asset valuation methods, saying the pension fund must adhere to GASB rules of using fair, or market, value.

However, in another section of its report, the auditor general said for the properties in the joint venture, investment value can be used. It said PSPRS, as an investor in the entity that owns the real estate, doesn’t value its investments based on the appraisals but rather on values provided by Desert Troon under the joint venture’s operating agreement.

Because of that scenario, the auditor general quotes generally accepted accounting principles as allowing Desert Troon to estimate the value of PSPRS’ ownership interest. The pension fund used that number.

Mr. Holder, the USC dean, disagreed that PSPRS could report investment value for the Desert Troon joint venture portfolio. He said regardless of whether joint venture real estate assets can be sold at the time they are appraised, the GASB requires public pension funds to list real estate at fair, or market, value.


PSPRS mainly made direct real estate investments with several firms between 1990 and 2008 as the pension fund expanded its investments in Arizona strip shopping centers, office buildings, residential development and vacant land.

Most of the direct real estate investments were in the Phoenix area.

Concentrating investment in one area can be risky because a pension plan could expose itself to the vagaries of that market, said Robert Heinkel, a professor at the Sauder School of Business at the University of British Columbia, Vancouver, and co-author of the book, “The Role of Real Estate in a Pension Portfolio.”

While Mr. Heinkel isn’t familiar with the Arizona pension fund, he commented: “It’s real obvious that you want to diversify not just in real estate investments, but any investments. It’s dangerous not to do so.”

When Mr. Parham became CIO on May 27, 2009, the Arizona and Southwest real estate markets had collapsed, which meant such investments the pension plan made had already soured. Pension officials began publicly acknowledging problems in the real estate portfolio that year, board and investment committee meeting minutes show.

Problems with some properties emerged when the pension fund was called on to help Desert Troon repay debt from property investments for both portfolios.

Minutes of a January 2010 PSPRS investment committee meeting show Desert Troon was facing demands from bank lenders requiring immediate repayment of debt on properties, first in the joint venture (DTR1) and later in both portfolios.

When asked how much pension fund money was used to pay down debt on properties managed by Desert Troon, Mr. Hacking said in an e-mail: “We cannot say without research … but we have confirmed that since 2009, (PSPRS) has contributed $93 million to DTR1 and $76 million to DTR1C.“

In some cases, PSPRS was forced to repay the debt because it had guaranteed it would make payments if the joint venture — DTR1 — could not.

The pension fund’s pledge enabled the PSPRS Desert Troon joint venture to get a lower interest rate on loans, according to minutes from a PSPRS board meeting on Nov. 30, 2011.

“The decision to enter into recourse (debt) was made when debt was cheap for joint ventures and the market was doing well, in order to save money,” Don Stracke, a consultant from the pension fund’s general consultant NEPC LLC, was quoted in the minutes as saying. “The situation that has occurred was not foreseen and today we would never agree to recourse debt.”

Mr. Hacking said in a posting on the fund’s website in August 2013 that Desert Troon had done an excellent job managing depressed real estate assets back to health. He cited more than $37 million in real estate sales at that time, two to three times their value in December 2007, he said. He didn’t say how many properties were sold.

Mr. Hacking has said the pension fund intends to sell the properties managed by Desert Troon when the market recovers. For now, most of the properties in the two Desert Troon-managed portfolios remain unsold.

Desert Troon earns fees from PSPRS as its real estate manager, operating partner, developer and property manager as well as when properties are sold. The pension fund paid Desert Troon $12 million in fees in 2012, according to a report compiled by ORG Portfolio Management, the pension fund’s real estate investment consultant. The report concluded the fees were appropriate.

Performance monitoring

The valuation dispute is just one issue raised by the former employees. They also questioned the lack of quarterly reporting by Desert Troon about investment performance of the portfolios the company manages for the pension fund.

As the Arizona fund’s allocations to Desert Troon increased, PSPRS’ oversight of the manager did not keep up with Desert Troon’s expanding role, said Mr. Corens, who was real estate manager from 2006 to 2010.

Messrs. Corens and Selfridge said in separate interviews that Desert Troon failed to provide quarterly financial reports, which real estate investment consultants say are an industry standard.

The two former PSPRS employees said that while Desert Troon did provide annual performance reporting, that reporting generally was limited to only aggregate data on the overall Desert Troon portfolio. That, they said, made it difficult for the PSPRS staff to determine what pieces of the portfolio were performing well and which were underperforming.

Mr. Hacking in his e-mailed answers to questions, said Desert Troon “has always complied, and continues to comply, with all of its financial reporting obligations under the DTR1 Operating Agreement and the DTR1C Management Agreement.”

This article originally appeared in the June 23, 2014 print issue as, “Dust-up in the desert”.

LINK: Desert Troon Potentially Linked to Scam In Norway (Dagens Næringsliv report)


ADOA Whistleblower Seeks $1.5 Million For Wrongful-Termination

Former state official fired by Brewer seeks $1.5 million

Craig Harris and Yvonne Wingett Sanchez, The Republic | April 17, 2015

Story Highlights

  • Ex-Department of Administration director seeks nearly $1.5 million for wrongful termination.
  • Brian McNeil’s claim alleges former Gov. Jan Brewer’s administration engaged in unethical behavior.
  • Former Gov. Jan Brewer declined to respond to the allegations.

Brian McNeil, former director of the Arizona Department of Administration, is seeking nearly $1.5 million from the state in a wrongful-termination claim that alleges former Gov. Jan Brewer’s administration engaged in unethical conduct.

Among the allegations in the 94-page claim — a precursor to a lawsuit — is that high-ranking officials within Brewer’s administration engaged in a “legislative ploy” to overturn a $3 billion mental-health contract.

The claim also accuses Brewer of quietly giving staff raises that were outside state policy, despite publicly cracking down on large raises given to certain employees of the Arizona Public Safety Personnel Retirement System pension.

The claim further contends Brewer staffers deliberately dragged their feet on the release of public records to the media, as opposed to an attempt “to be in compliance with the letter and spirit of Arizona law.”

Brewer, who left office in January, declined to comment on McNeil’s claims.

McNeil, whom Brewer fired in late October, also says in his claim that he was terminated without explanation and was denied the opportunity to respond to “unfounded” allegations of racist behavior and sexual misconduct toward a female employee.

RELATED: Brewer fires agency head who exposed wrongdoing

MORE: Brian McNeil subject of ‘racial and sexual discrimination complaint’

Shortly after Brewer fired McNeil, her spokesman, Andrew Wilder, released a U.S. Equal Employment Opportunity Commission complaint by that employee that alleged McNeil had discriminated against her.

McNeil’s claim contends the state’s decision to “disclose the unsubstantiated and false allegations” to the media was motivated to discredit him because he had fought the Brewer administration over the misuse of public funds and government waste.

McNeil declined comment when reached by phone Friday.

The claim asserts McNeil, who also served in the military, had his reputation damaged by the firing, tarnishing a long and distinguished career in state government.

The claim seeks $1.46 million, including $500,000 for damage to reputation and $250,000 for emotional distress.

In addition to seeking monetary damages, the claim provides a rare public peek into the inner workings of the Governor’s Office and allegations of bare-knuckle politics in which Brewer rewarded friends while overlooking public policy or state law.

One of the biggest controversies centered on a $3 billion state mental-health contract awarded to Mercy Maricopa rather than former provider Magellan Health Services.

The claim contends that Brewer had been upset that Mercy Maricopa had won the bid. In March 2014, according to the claim, a lobbyist told McNeil that Brewer’s chief of staff, Scott Smith, authorized a legislative ploy to get the contract overturned and awarded to Magellan Health Services.

In late March 2014, Magellan made a last-minute attempt to have the Legislature derail the contract, but it didn’t work.

The claim also alleges Joe Sciarrotta Jr., Brewer’s legal counsel toward the end of her tenure, tried to influence the decision-making process in favor of a Magellan contract. Brewer at the end of her term appointed Sciarrotta as a judge to Maricopa County Superior Court. Sciarrotta could not be reached for comment.

The claim also contends that Brewer engaged in a “bait and switch” in regard to her personnel-reform initiatives, which imposed strict procedures to follow in granting raises for state employees.

In summer 2014, McNeil ordered a rollback of inappropriate raises that had been given to some staff members at the Public Safety Personnel Retirement System without ADOA approval. The raises were first uncovered by The Arizona Republic, forcing the retirement of PSPRS Administrator Jim Hacking.

McNeil claims he discovered through his office’s investigation of PSPRS that other state agencies, including the Governor’s Office, also had given out improper raises without ADOA approval. His claim says Kathy Peckardt, Brewer’s deputy chief of staff and a key player in advancing the governor’s personnel-reform agenda, pushed him to “suppress” those records.

Contacted by The Republic, Peckardt declined to answer questions except to say, “I can’t comment on pending litigation.” Brewer elevated Peckardt to head of ADOA after she fired McNeil. Peckardt retired at the end of March.

The claim describes “significant friction” between McNeil and the Governor’s Office over her state parks director’s nepotism. The Republic reported at the time that then-Parks Director Bryan Martyn had hired his three sons and increased the pay for their positions.

McNeil’s claim says Brewer had no intention of disciplining Martyn over the matter, but she eventually gave him a three-week suspension after McNeil expressed outrage and pushed for harsh discipline. Newly elected Gov. Doug Ducey did not retain Martyn as parks director.

Kraig Marton, McNeil’s attorney, wrote in response to questions from The Republic that McNeil had “an extremely limited relation” with Brewer during his tenure as ADOA director. Marton wrote that McNeil’s relationship with Smith “started off positively, but in time their relationship became strained.”

Asked why McNeil did not speak publicly before he was terminated about the improper behavior he now alleges, Marton wrote, “It is true that things happened that troubled Mr. McNeil while he was in state government, but he did not react or act at the time because he hoped they would get better. Also, on a number of occasions, bad results were avoided based on the hard work and diligence of McNeil and some other state employees. McNeil’s intention in discussing the matters now is to share some perspective on the additional impact on him resulting from the poor behavior and practices of the governor’s most senior staffers.”

Watchdog Reporting and The Public Safety Pension

Watchdog reporting is one of The Arizona Republic’s priorities

Cherrill Crosby, The Republic | January 10, 2015

Because They Know They Can Get Away With It

 It’s why the Public Safety Personnel Retirement System this year offered 20, 35 and 42 percent raises to three members of the crack investment staff of the state’s most poorly managed pension system.

This is the perfect example of how the elite think. “We are the deserving people”. They don’t see the “little” people, the homeless Vet, the Mom and kids living in a shabby flop house with all hope gone, the dead & abused children from a lack of CPA funding. Because of their already high salaries they don’t live in run-down, crime infested neighborhoods. They don’t see the unemployed, or under employed guy/gal working 2 part time jobs, who are paying their 8+% sales tax on shoes and tires having meatless days and no milk till the next payday. They only see a pile of tax dollars, they can increase at will! What’s 160K? Just close another homeless shelter, short the schools, and bury another kid who wasn’t reached in time. Can we really expect them to do their jobs at peak performance for 100-175K a year? Guess not!

Commentary by Lois Keating       AZ Central 1-3-15

Gov. Brewer’s staff cashes in on way out the door

Laurie Roberts, columnist | – January 2, 2015

Fresh off her farewell world tour – you know, that “trade mission” to China in the waning weeks of her term — Gov. Jan Brewer decided to send off her staff with a little something extra.

That’s right, here in a state that’s broke and getting broker, the outgoing governor reached for the checkbook (ours, of course) and played Santa to her staff.

According to Republic reporter Craig Harris, Brewer doled out $10,000 in bonuses to each of 10 employees, eight of whom already pull down $125,000 or more a year.

In all, she gave $160,000 in bonus pay to 22 staffers, many of whom already earn five or more times the median income of the mere taxpayers who must foot the bill. Half of the money was awarded in July and the rest this month.

This, as the state faces a $1.5 billion shortfall.

Brewer, naturally, was unavailable for comment. Because a lame duck governor in her last week is just sooooo busy and can’t possibly come to the phone to explain her final act as steward of our state and our money.

But readers sure had plenty to say it, responding to my blog on Brewer’s publicly funded largesse.

“Let’s see,” wrote Cindy Mendenhall Rosenberg, of Phoenix. “The Legislature spends $800k on remodeling, and the Gov hands out $100k in bonuses, but not a penny to spare for court-ordered funding for the schools.”

“Simply disgusting,” wrote Cindy Hersh, of Phoenix. “So, if I decide to not pay taxes will that help curtail this irresponsible spending! Goodbye and good riddance!”

“They do it,” Sam Fernandez wrote, “simply because they can and there is nobody there to stop them!”

“There needs to be real reform in many levels of government,” wrote Kim Fisher, of Phoenix. “The question is, will people support those working towards it or just complain about it.

I’m guessing we know the answer to that, which is why so many of our leading lights act as they do.

Because they know they can get away with it.

It’s why they felt entitled to give unauthorized raises to 169 state employees in the year that ended in July – that is, raises that weren’t approved by the Department of Administration as required. Of those 169 raises, 59 went to staffers who work for outgoing Attorney General Tom Horne and 47 work for outgoing state Superintendent John Huppenthal. Another 37 work for the Corporation Commission.

It’s why the Public Safety Personnel Retirement System this year offered 20, 35 and 42 percent raises to three members of the crack investment staff of the state’s most poorly managed pension system.

It’s why outgoing Corporation Commissioner Brenda Burns gave a $10,000 bonus to her $99,501-a-year assistant Thomas Galvin this year.

It’s why Corporation Commissioner Susan Bitter Smith gave a $10,500 bonus to her $94,500-a-year assistant Laurie Woodall.

And why the Corporation Commission gave Utilities Division Director Steven Olea a 21.5 percent raise, to $150,000 last year.

Rebecca Wilder, spokeswoman for the commission, said the bonuses were “due to exemplary performance and extra workload”.

Because as we all know, top aides are the only ones who go above and beyond.

In Brewer’s office, they surely must.

Among those who got $10,000 raises were Chief of Staff Scott Smith (to go with his $175,000 salary), Deputy Chief of Staff Kathy Peckardt ($165,000), Budget Director John Arnold ($147,000) and General Counsel Joe Sciarrotta Jr. ($143,325).

Also, Policy Director Michael Hunter ($139,125), Communications Director Andrew Wilder ($135,000), Deputy Policy Director Donald Hughes ($125,000), Federal Relations Director Ryan Serote ($125,000), Legislative Affairs Director Lorna Romero ($88,000) and Special Assistant to the Governor Susan Myers ($85,775).

Andrew Wilder described the bonuses as “retention payments.”

As if earning $135,000 a year to be the governor’s mouthpiece wasn’t enough of an incentive to stick around.

Meanwhile, per capita income in Arizona is $25,358.

Me? I’m thinking more of us ought to go into “public service.”

And The Circle Is Now Complete

Gov. Brewer gives staff big bonuses despite budget cuts

Craig Harris, The Republic | December 30, 2014

Multiple State Agency Heads Grant Illegal Raises, Only PSPRS’ Was Fired

Maybe there were more problems at the AZ Public Safety Pension?

Maybe the Governor knew that?

Report: Some unapproved state raises topped 40 percent

Alia Beard Rau, The Republic | December 12, 2014

Brewer Fires Leader Who Exposed Wrongdoing

Brewer fires agency head who exposed wrongdoing

Craig Harris and Yvonne Wingett Sanchez, The Republic |  October 20, 2014

This summer, McNeil forced the retirement of Public Safety Personnel Retirement System Administrator Jim Hacking, after The Republic uncovered — and ADOA confirmed — that Hacking gave illegal pay raises to his staff.


Gov. Jan Brewer has fired Brian McNeil, the straight-shooting military man who led the Arizona Department of Administration and exposed wrongdoing within her administration.

The reason for his firing has not been disclosed, and McNeil could not be reached for comment.

Andrew Wilder, Brewer’s spokesman, on Monday confirmed McNeil’s termination, but said there would be no further comment because it was a personnel matter.

Kathy Peckardt, Brewer’s deputy chief of staff, sent an e-mail marked “high” importance around 10 a.m. Monday to Department of Administration employees explaining that he no longer was with the agency. The e-mail also did not explain McNeil’s departure.

As a department head, McNeil served at Brewer’s pleasure.

Peckardt said in her e-mail that Brewer has asked her to serve as interim ADOA chief until the next governor appoints a permanent director. A new governor will be seated in January.

Peckardt is a long-time ADOA employee, most recently serving as state human resources director under McNeil. She was integral in implementing Brewer’s personnel-reform legislation in 2012.

McNeil, who serves in the U.S. Army Reserve, expected state employees to live and work by high standards, but often found himself at odds with Brewer and her chief of staff for investigating and cleaning up messes in Brewer’s administration.

For example, McNeil’s office last year investigated Jesse Hernandez, the ex-chairman and director of the state Board of Executive Clemency. McNeil found nine cases of inappropriate behavior. The offenses included Hernandez promoting an unqualified female employee he was dating and giving her a $21,340 pay raise.

Hernandez, a Republican political operative appointed by Brewer, had no experience in corrections or criminal justice. He eventually resigned following McNeil’s investigation.

McNeil’s office earlier this year also investigated Arizona State Parks Director Bryan Martyn after Martyn hired his three sons to work for the agency. Martyn initially was hired by the Parks Board. He had no prior parks experience and was a political friend of Brewer’s. He was working at her pleasure when the investigation occurred.

The ADOA investigation resulted in Martyn being suspended for two weeks without pay, costing him $5,229.80 in gross earnings. Former ADOA Chief Human Resources Officer DiAnne Baune, who advised the parks department on personnel issues, resigned in the wake of the investigation and later retired. Martyn remains at the agency.

This summer, McNeil forced the retirement of Public Safety Personnel Retirement System Administrator Jim Hacking, after The Republic uncovered — and ADOA confirmed — that Hacking gave illegal pay raises to his staff.

Brian Tobin, the PSPRS chairman, allowed Hacking to retire and receive a severance of roughly $107,250, and an annual pension of roughly $86,704. Tobin, brother of House Speaker Andy Tobin, and the other six current PSPRS board members are Brewer appointees.

According to a state biography, McNeil became ADOA director on Nov. 1, 2012, following a brief stint as a lobbyist with Public Policy Partners. Prior to that, he was Brewer’s deputy chief of staff.

McNeil was executive director of the Arizona Corporation Commission from 1999 to 2009. He also served as deputy director for the state Department of Health Services and was a policy adviser for Gov. Fife Symington.

McNeil served in the U.S. military and remains a member of the U.S. Army Reserve. He has had two deployments to Iraq.

McNeil also served [???] on the Board of Investment of the state Treasurer’s Office, and the board of the Arizona State Retirement System.

Vas ist das ???

MORE:  ADOA Probes Arizona Public Safety Pension

Respectable Murder And Pure Wind

“Political language is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.”

-George Orwell


No Confidence With The Current Board Of Trustees

I am willing to march and hold signs……

As a retired LEO my retirement check barely pays my bills and with the high costs of medical insurance I just don’t see how I will be able to keep up financially. How can we as retirees organize and make OUR voices heard? I have NO confidence with the current board. Time for change and time that our elected or soon to be elected officials wake up. I am willing to march and hold signs or do whatever it takes to save our retirements that WE all have worked and sacrificed for……



The Letter That Prompted The Fourth Investigation Of AZ PSPRS

Pensioners First-

  • Phoenix City Councilman Sal DiCiccio requests that the Arizona Attorney General’s Office investigate and prosecute illegal activities at the Arizona Public Safety Personnel Retirement System.
  • According to the Arizona Republic, the Attorney General’s Office was conflicted and unable to conduct the requested investigation.
  • According to the Arizona Republic, the Arizona Auditor General will again be investigating allegations of serious irregularities and potential illegal activity by PSPRS management.

Arizona Republic – August 12, 2014:

Phoenix City Councilman Sal DiCiccio, an outspoken critic of pension system abuses, said the PSPRS board has “no accountability to taxpayers or the beneficiaries of the pension plan” in awarding bonuses to Parham during a FBI investigation.

“This is insane. They have the worst financial record of any of the (state) funds, and they are giving him a bonus?” DiCiccio said.

The councilman also has formally asked the Attorney General’s Office to investigate the illegal raises Hacking gave to the investment staff. DiCiccio also wants the raises, which were stopped last month, repaid.

Stephanie Grisham, a spokeswoman for Horne, said Monday that DiCiccio’s complaint has been forwarded to the Auditor General to investigate.

Councilman Sal DiCiccio’s letter to the Arizona Attorney General:

Sal DiCiccio
District 6
(602) 262-7491
Fax: (602) 534-3574
TTY: (602) 495-5810

Department of Law
1275 West Washington Street
Phoenix, Arizona 85007
July 10, 2014

Dear Attorney General Tom Horne:

Yesterday, the Arizona Republic reported in a column by Craig Harris, titled Pension trust ends illegal
raises uncovered by The Republic, that the Public Safety Personnel Retirement System (PSPRS) illegally granted pay raises of up to 27% to five investment staff employees without the approval of the state Department of Administration, as required by law. That a body entrusted with a fiduciary duty to our state’s retirees has engaged in an apparent violation of the law is extremely troubling, and I urge your office to investigate the matter thoroughly. In particular, the person or persons who authorized the raises should be identified and appropriate disciplinary and legal actions be taken.

Such mishandling of state funds is unacceptable at any time, but it is particularly offensive during this
period in which the state and cities are finding it difficult to provide fundamental government services like police protection due to budget shortfalls. The fact that our capitol building has been sold to an outside party due to Arizona’s financial straits is testament to the gravity of our situation. Every taxpayer dollar matters, and while I am pleased to learn that the illegal raises have been halted, this measure is not nearly enough. On behalf of the taxpaying citizens of Arizona, we must insist on recovering the improperly granted money without delay. In this letter I am requesting that:

  1. Your office take measures to immediately return those taxpayer dollars that were illegally granted as pay raises.
  2. Your office takes steps to identify the person or persons responsible for granting these pay raises. And, to determine if those individuals knowingly granted those pay raises contrary to state law.
  3. Your office takes the necessary steps to prosecute those individuals if they took this action knowing full well it was illegal.

Confidence in public officials to do their duty honestly and to safeguard the interests of the people is
fundamental to our system of government. The PSPRS violated that trust, but swift action by your office to recover those funds will help to restore a measure of the trust that was lost.

Councilman Sal DiCiccio

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