Sexual Harassment

Three articles:

First article –

PSPRS gives raise, bonus to executive who made sexual remarks

Craig Harris, The Republic |  July 7, 2014

The Public Safety Personnel Retirement System this year fired an emotionally distraught employee who had been subjected to sexual remarks by her boss, then gave bonuses, a pay raise and a three-year contract extension to the executive who made those remarks, records obtained by The Arizona Republic show.

A PSPRS internal investigation confirmed that the “extremely offensive” sexual comments were made during an April 25, 2012, staff meeting. Recent court filings in an unrelated case say the woman, whose name The Republic is withholding, was told the supervisor who made the comments, Martin Anderson, would be “reprimanded and punished,” but that nothing happened.

Court records indicate the woman spoke to FBI agents, who are investigating whether the pension system used inflated real-estate valuations in its financial statements. She was a member of an investment team knowledgeable about financial information in that case.

PSPRS records show that Anderson, deputy chief investment officer, acknowledged in a signed statement shortly after the incident that he made “extremely ill-considered and offensive” sexual remarks. He was given an unsatisfactory performance rating after the incident, and his bonus was cut.

However, records released by PSPRS on Thursday show Anderson was given a $60,000 retention bonus this year and a 13 percent raise on June 1, bringing his base annual compensation to $208,000. His contract also was extended.

Anderson could not be reached for comment.

Jim Hacking, PSPRS administrator, approved An­derson’s contract extension June 1. It calls for guaranteed inflation pay raises and another retention bonus of $69,000 in 2017.

Hacking did not respond to questions about the matter. Brian Tobin, PSPRS chairman, did not return a call seeking comment.

The recent court filings offer a glimpse into the internal discord that beset the embattled $7.9 billion state trust fund, which provides retirement benefits for Arizona police officers, firefighters, elected officials and prison guards. The trust is under a federal criminal investigation, as well as a state workplace and sexual-harassment inquiry.

After the 2012 comments, problems at PSPRS escalated. Last year, three senior-level investment staff members and the in-house legal counsel quit during an internal dispute over whether the values of trust real-estate holdings were inflated to trigger bo­nuses.

That eventually prompted a federal investigation, including a grand jury’s request to review internal PSPRS documents. The Republic has learned federal agents have interviewed at least four ex-PSPRS employees, including the woman who was fired.

An FBI spokesman said the PSPRS investigation is on­going.

Hacking has blamed the inquiry on disgruntled former employees.

The woman in question was a senior contracts specialist. Like those who quit, shepreviously had good performance reviews, PSPRS records show. She continued to work after the 2012 episode but was terminated Feb. 25 of this year.

PSPRS, in a written statement, said the circumstances surrounding her separation are private and confidential.

Documents filed in Maricopa County Superior Court say the woman perceived that the pension trust “allowed other employees to actively emotionally harass her” and she “did not feel safe at work.” The woman was seeking treatment for emotional distress when she was “terminated during her disability,” her psychologist wrote.

The woman is now being treated for several maladies, according to court records. Her lawyer declined comment.

In April, the Arizona Department of Administration acknowledged that it had expanded its investigation of workplace violations at PSPRS to include sexual harassment. The state has not disclosed who that inquiry is related to. Brian McNeil, ADOA director, did not respond to questions about the case.

The woman’s situation is detailed in filings in a civil case in which the trust sued Anton Orlich, a former senior portfolio manager accused of taking internal PSPRS documents as part of the dispute over asset valuations. Orlich, a whistle-blower who has been interviewed numerous times by the FBI, said he had permission to take the records. That civil case is ongoing.

The woman filed a motion in Orlich’s case asking to keep PSPRS from deposing her. The filing said she was unable to comply because she suffers from post-traumatic stress disorder and other emotional issues. The woman was not deposed.

Her psychologist statedin court records that the woman had an emotional condition that was “triggered by stress and admitted sexual harassment experienced during her employment.”

Records previously obtained by The Republic show the sexual comments were made during an investment-team meeting at PSPRS headquarters in Phoenix. A PSPRS investigation found Anderson said in front of the team that the woman could improve her “paper currency” by having her “sit on the copy machine.”

Anderson was chief of staff at the time. He supervised the woman and the investment team. A trust investigation determined the comments were “insensitive,” had “sexual overtones” and left no doubt that they were “justifiably offensive” to the woman. Anderson signed a document that confirmed the findings. About a month after the incident, records show, the woman acknowledged in writing that “PSPRS acted swiftly and appropriately in this matter” and that “actions taken are appropriate and sufficient to address the problem.”

The trust demoted Anderson as chief of staff, no longer allowed him to supervise the woman and said the incident would affect his bonus. For the fiscal year when the incident occurred, Anderson received the second-lowest performance rating among the nine-member investment staff. That rating lowered his 2012 bonus to $5,670.

MORE: Complete coverage of pensions

Second article

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.

More: Pension-fund workers say bosses were retaliatory

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.”

TheRepublic 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.

Third article

Hacking says law firm hired to investigate Arizona Public Safety staff’s complaints

By Randy Diamond | July 19, 2013

Charges by investment staff at the $7.3 billion Arizona Public Safety Personnel Retirement System that a top-down culture allows management to retaliate against dissent are being investigated by an employment law firm.

Lewis and Roca LLP was hired by the pension fund “so we could have an independent investigation,” James Hacking, administrator of the Phoenix-based pension fund, said in an interview. The investigation, begun in mid-June, will be completed in the next month, Mr. Hacking said.

Mr. Hacking said he learned of the allegation after Mark Steed, acting chief investment officer and chief of staff in the Arizona Public Safety fund’s investment office, told him the issue was raised during a May 20 investment team meeting. He said he then instructed Mr. Steed to write a memo detailing the events of the meeting.

Two of 10 investment staffers and the investment office’s counsel have resigned in recent weeks.

The two top managers of the investment office — CIO Ryan Parham and Deputy CIO Marty Anderson — are named in the memo. They are both on medical leave. Mr. Parham has been out since May 7 and Mr. Anderson since May 23 because of scheduled open-heart surgery, Mr. Hacking said. Mr. Hacking said he expected Mr. Parham to return to work later this month and Mr. Anderson to return in August.

Mr. Steed’s memo said one attendee of the May 20 meeting, who was not named, wanted to discuss the “team culture.” The person stated the culture was “inconsistent” with what was supposed to be the investment office’s “Socratic” culture, as defined previously by Messrs. Parham and Anderson. Team members are supposed to be free to disagree and challenge each other in the best interests of the pension fund, Mr. Steed’s memo said.

“However, the attendee asserted that the culture is not Socratic and in fact team members are punished for disagreeing with management,” the memo said.

The memo also details an unspecified punishment levied by Messrs. Parham and Anderson against portfolio manager Mark Selfridge for asking what was described in the memo as “rude, offensive and disrespectful” questions in e-mails he sent to officials at Desert Troon Cos., one of the pension fund’s external real estate managers.

Desert Troon President Daniel Smith was out of town and not available to comment for this story on July 19.

Mr. Anderson said at the May 20 team meeting that Mr. Selfridge was disciplined for his “tone,” the memo states, but seven members of the investment team disagreed and stated that he was disciplined because of his questions.

Mr. Hacking confirmed that Mr. Selfridge resigned, as did portfolio manager Anton Orlich and Andrew Carriker, the chief investment counsel. Mr. Hacking said all of them questioned whether valuations made by Desert Troon in a real estate portfolio managed for the Arizona public safety pension fund were proper, but he could not say if they resigned because of that.

Mr. Hacking said he and the board of trustees believe the valuations were proper. He added that on July 18, at the direction of the pension fund’s board, he asked the state auditor-general to look into the valuation issue and make an independent determination “as a result of all the controversy.”

Mr. Hacking’s letter to the auditor-general said Desert Troon concluded the value of the real estate assets managed is around $303 million. But Mr. Orlich, the portfolio manager who quit, thought it should be $90 million lower. The distinction is important because, generally, the higher the valuation, the higher the money manager’s fee.

Mr. Hacking said in the interview that Mr. Selfridge was not disciplined because of questions, but because his e-mails to Desert Troon were “offensive.”

Mr. Steed’s memo said the “unhealthy culture” at the investment office became worse following a sexual harassment incident in April 2012. Mr. Hacking said Mr. Anderson was disciplined for making an offensive remark to a female employee, and was demoted, losing the chief of staff title that Mr. Steed now holds.


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