The executive director of the Arkansas Teacher Retirement System has disclosed that four law firms reimbursed him for more than $42,000 of his travel expenses during the past four years for meetings on class-action lawsuits.
System Executive Director George Hopkins disclosed these payments in amendments filed last week to his Statements of Financial Interest for 2014, 2015, 2016 and 2017.
Hopkins filed these amendments after state Rep. Mark Lowery, R-Maumelle, suggested that Hopkins might consider amending his Statement of Financial Interest for 2017 because that report didn't reflect the travel reimbursements, according to records requested by two legislative committees looking into the lawsuits.
Hopkins, who is an attorney, said he didn't report the reimbursement because of guidance from the system's former internal auditor, George Snyder.
"The guidance at that time was that reimbursements required by a governmental contract, rather than an honorarium or voluntary payment, were not required to be disclosed. I have consistently followed that guidance," said Hopkins, who started as executive director in December 2008. He is a former Democratic state senator from Malvern.
"I do not know whether the travel in question should have been listed on the SFI," Hopkins said Tuesday in a written statement to the Arkansas Democrat-Gazette. "If it should have been, I accept full responsibility. Any future travel will go through ATRS and the cost would be reimbursed to ATRS by the vendor."
Arkansas law requires the state's elected officials and top-ranking employees to "list each nongovernmental source of payments for your expenses for food, lodging, or travel which bears a relationship to your office when you appear in your official capacity when the expenses incurred exceed $150."
Graham Sloan, director of the Arkansas Ethics Commission, said Wednesday that he would advise officials in similar circumstances to Hopkins' to disclose the reimbursement of their travel expenses by a nongovernmental source, but he stopped short of saying Hopkins violated state law.
As for the guidance cited by Hopkins for not disclosing the reimbursements, Sloan said, "That's the first time I have ever encountered that interpretation."
The law firms that reimbursed Hopkins for his travel expenses are among five securities monitoring firms that file class-action lawsuits on a contingency fee basis on behalf of the system. The suits are filed to recover financial losses suffered by the system because of intentional fraud.
In the financial interest amendments, Hopkins disclosed:
• In 2014, Radnor, Pa.-based Kessler Topaz Meltzer and Check LLP law firm paid $4,020 toward Hopkins' expenses for two trips to New York and a trip to Los Angeles.
The New York-based Labaton Sucharow LLP law firm paid $2,537 toward Hopkins' expenses for two trips to New York.
• In 2015, Labaton Sucharow paid $7,536 for three trips to New York, one to Boston and one to Orange County, Calif.
• In 2016, Labaton Sucharow paid $9,158 toward his expenses for two trips to Washington, D.C., two to New York and one to Alexandria, Va.
The New York-based Bernstein, Litowitz, Berger & Grossmann law firm paid $1,048 toward his expenses for a trip to New Orleans.
Labaton Sucharow also spent $293 on breakfast and lunch for 15 to 20 system employees who worked on Memorial Day 2016.
• In 2017, Labaton Sucharow paid $11,216 toward his expenses for four trips to New York, two to Boston and one to Detroit.
Bernstein, Litowitz, Berger & Grossmann paid $4,666 toward his expenses for three trips to New York and a trip to New Orleans.
New York-based Kaplan, Fox & Kilsheimer LLP paid $2,095 for a trip to New York.
Hopkins also reported that Labaton again paid for breakfast and lunch for 15 to 20 members of the system's staff who worked on Memorial Day 2017 after the vendor saw on Hopkins' "executive director update" report that the office would be open that day. The cost was $243.
When asked if the firms paid for travel in years prior to 2014, Hopkins said Wednesday, "I updated the SFI reports with the reimbursement information I had. I had some travel in earlier years that will be addressed."
Lowery is a co-chairman of the Joint Performance Review Committee, which met with the Joint Committee on Public Retirement and Social Security Programs in a three-hour public hearing last week to discuss the retirement system participating as lead plaintiff in the lawsuits against firms over investments.
Asked about Hopkins' amendments to his financial statement reports, Lowery said Wednesday, "That's all we can really suggest that he do."
But Lowery, who called for Hopkins' resignation last week, said that makes him wonder on what other matters is Hopkins wrong.
The Labaton Sucharow law firm filed a lawsuit against Boston-based financial services provider State Street Corp. on behalf of the teacher retirement system in 2011.
U.S. District Judge Mark Wolf of Boston approved a $300 million settlement of the case in 2016, along with $75 million in attorneys' fees.
Wolf appointed a retired federal judge, Gerald Rosen, as special master to investigate the attorneys' fees after the Boston Globe raised questions about some of them.
The special master has recommended that three law firms involved disgorge more than $10 million in attorneys' fees, including a $4.1 million referral fee paid to Texas attorney Damon Chargois. The three law firms are Labaton Sucharow, Thornton Law Firm LLP and Lieff Cabraser Heimann & Bernstein.
Labaton Sucharow said Rosen suggested that the lawyers engaged in questionable conduct by paying a referral fee, although the payment was permissible under Massachusetts law.
In sworn testimony last week, Hopkins repeatedly told lawmakers that, until the special master raised questions about the referral fee, he didn't know the fee was part of the attorneys' fees awarded.
Hopkins has said he told Wolf that then-Sen. Steve Faris, D-Central, introduced the Labaton firm to then-system Executive Director Paul Doane in 2007, based on documents that he has reviewed.
Faris has said he called Doane at the suggestion of a friend, Texas attorney Tim Herron, and indicated the Labaton firm's interest in becoming a securities monitoring firm.
Herron is a former law partner with Chargois.
Hopkins also told lawmakers he has learned that Chargois was paid a total of "somewhere around $1 million" in referral fees in six other cases in which the Labaton firm filed suit on behalf of the retirement system.
But Hopkins said he has directed the system's law firms not to pay any more referral fees. He also said any fee that is shared by a law firm with another firm in cases for the system has to relate to work done, be reasonably proportionate and "can't be just what they call a blanket referral fee."
On June 28, Wolf rejected Labaton Sucharow's request that he recuse from this case. The law firm appealed his ruling to the 1st U.S. Circuit Court of Appeals. Among the issues is a private sidebar on May 30 in which Wolf suggested that when Rosen's report became public, "there are going to be questions about the origin of this relationship and whether all of those millions of dollars stopped with Mr. Chargois."
But the 1st U.S. Circuit Court of Appeals on Wednesday declined Labaton's request for an order directing Wolf to recuse.
Based on a part of his deposition unsealed this week, Chargois said he shared portions of his $4.1 million referral fee payment with his law partner Kamran Mashayekh, who lent money to their firm over the years; his legal assistant Elaine Doyal; and "the IRS, lots of debt service." Herron didn't get any part of the $4.1 million referral fee, Chargois said.
Chargois also said in the deposition that Herron, who was friends with Faris, "maybe in the very beginning" received a part of the referral fee payments made by Labaton to Chargois over time.
Hopkins said the system is expected to collect up to $300,000 from the State Street settlement alone and has collected more than $40 million in class-action lawsuits during the past 10 years.
The Arkansas Teacher Retirement System is the state government's largest retirement system with about $17 billion in investments and more than 100,000 working and retired members.
Metro on 07/26/2018