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State auditor's ties to law firms noted in retiree-system effort

by Michael R. Wickline | August 19, 2019 at 6:59 a.m.
FILE - The Sentinel-Record/Mara Kuhn TREASURE HUNTER: Arkansas Auditor Andrea Lea speaks about the work of the Unclaimed Property Division at the Hot Springs National Park Rotary Club's weekly meeting at the Arlington Resort Hotel & Spa on Sept. 2, 2015. The division's work is known as the Great Arkansas Treasure Hunt because of how much property is abandoned and turned over to Lea's office.

The trustees for the Arkansas Public Employees Retirement System on Wednesday will consider refreshing the system's list of law firms that represent it in class-action lawsuits -- two and a half months after the state auditor bowed out of helping to develop a scoring system for evaluating candidates.

The so-called securities monitoring firms represent the system in class-action lawsuits over investments. Securities monitoring firms are paid on a contingency-fee basis; potentially millions of dollars are at stake in successful cases.

State Auditor Andrea Lea, who also serves as a trustee for the retirement system, decided to extricate herself from helping the system's staff develop the scoring system. She cited work done by one of the firms for her office.

Her decision came shortly after a lobbyist for another firm pointed out to system Executive Director Duncan Baird that Lea's 2014 campaign received contributions from Texarkana attorney John Goodson, his law firm, law partner and his daughter.

Goodson's law firm works jointly with another firm as one of the securities monitoring firms now used by the retirement system. The firms applied to continue working for the system.

In a recent interview, Lea said she was unaware of the text to Baird from lobbyist Rett Hatcher before she decided against helping develop the scoring system.

She said she learned of the text from a reporter for the Arkansas Democrat-Gazette.

Goodson issued a written statement Saturday: "We continue to have a long standing working relationship with APERS dating back as far as 2005. Due to present ongoing litigation on behalf of APERS, we are unable to comment at this time."

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Which securities monitoring firms are retained by the Public Employees Retirement System and the Arkansas Teacher Retirement System has drawn increased scrutiny from some lawmakers, after a controversy last year over one such firm -- the Labaton Sucharow law firm -- paying a $4.1 million referral fee to a Texas-based attorney as part of a settlement of a class-action lawsuit. The lead plaintiff in that case is the Teacher Retirement System. (Teacher Retirement System Executive Director Clint Rhoden said he hopes that by the end of the month, the system issues a request for qualifications for securities monitoring firms. A request for qualifications is one of the steps involved in procuring services.)

The two systems are state government's largest, with investments that exceed $17 billion in the teachers system and $8 billion in the employees system.

According to Baird, the Public Employees Retirement System's current securities monitoring firms include:

• Bernstein Litowitz Berger & Grossmann.

• Cohen Milstein Sellers & Toll PLLC.

• Kessler Topaz Meltzer & Check LLP.

• Labaton Sucharow.

• Nix Patterson & Roach LLP, working jointly with the Keil & Goodson law firm.

• Spector Roseman Kodroff & Willis.

In mid-January, at Lea's suggestion, trustees decided it was time to refresh their list of firms. The system last hired such firms in 2013.

Baird said the request for qualifications was issued April 15 and that the deadline for applications was April 30.

All of the current firms reapplied except for Spector Roseman Kodroff & Willis.

Other firms that submitted their qualifications include: Berger Montague; Bernstein Liebhard along with Quinn Emanuel Urquhart & Sullivan; Block & Leviton; Bleichmar Fonti & Auld; Kaplan Fox; Lieff Cabraser along with Thrash; and Lowey Dannenberg.

In addition to those, others submitting their qualifications included Pomerantz; Wolf Popper; Rosen Law; Wolf Haldenstein Adler Freeman and Herz; Hagens Berman; and Scott+Scott.


Jay Wills, deputy director of the employees retirement system, said he developed the scoring system. Wills said he, Teacher Retirement System attorney Laura Gilson and Office of State Procurement attorney David Withrow independently scored the firms without making any recommendations to trustees on which firms to hire.

The employees system's trustees on May 15 had directed the staff to develop a rating system for firms seeking a contract with the agency, and it asked Lea to assist the system's staff.

Lea wrote in an email dated May 29 to Wills that "upon further reflection, out of an abundance of caution, I believe it best for me to bow out of these meetings [about developing scoring criteria] and just vote with the board after you all bring us a list of recommendations."

She said the state auditor's office is working with the Cooper & Kirk and Kessler Topaz law firms on a bonds-recovery case on a contingency-fee basis.

"It's a long term case and no money has crossed hands, and it probably won't get decided in my term [that ends in January 2023], but nonetheless I don't want any monkey wrench in this process," Lea wrote in the May 29 email to Wills.

In a text message to Baird dated May 16, Hatcher circled campaign contributions on one of Lea's 2014 campaign finance reports for the primary election, noting donations of $2,000 apiece from John Goodson; Goodson's law partner, Matt Keil; the Keil & Goodson law firm; and Goodson's daughter Wesley Goodson. Keil & Goodson also contributed $2,000 to Lea for the general election, according to her campaign finance reports.

Hatcher also noted that the Nix Patterson law firm and the Keil & Goodson law firm jointly submitted their qualifications to continue to be employed by the retirement system.

His text message to Baird was obtained by this newspaper in a public-records request under the Arkansas Freedom of Information Act.

Hatcher is a partner in the Gilmore Strategy Group that represents the Berger Montague law firm. The Gilmore Strategy Group's president is Jon Gilmore, a former deputy chief of staff to Gov. Asa Hutchinson and now the governor's chief political strategist.

Hatcher contributed $150 to Lea's campaign in 2014 when he worked for Secretary of State Mark Martin and then $100 to Lea's re-election campaign when he worked for Hutchinson, according to Lea's campaign finance reports. Hatcher also is a former deputy director at the Teacher Retirement System.

Asked about his text, Hatcher said in a written statement, "I brought it to Duncan Baird's attention because I know Duncan is a friend of mine and of Auditor ... Lea and I felt like it was Duncan's place as Executive Director to bring these issues up and resolve them and he told me he didn't think it was his place, and so we disagreed."

Hatcher referred to an article in this newspaper in 2016 about Lea's former chief of staff, George Franks, alleging that Lea didn't consider a Missouri-based law firm, known then as Walters Bender Strohbehn & Vaughan, with expertise in savings bonds for an estimated $160 million legal case.

According to Franks, Lea had a recommendation from a major contributor -- Goodson -- for the Cooper & Kirk and Kessler Topaz law firms to represent the state.

In 2016, Lea spokesman Skot Covert denied that the campaign contributions from Goodson and his law firm -- representing 3% of her total campaign contributions -- made any difference.

In response to Hatcher's remarks, Baird said Friday: "Jay Wills was designated in the [request for qualifications] as the sole point of contact. For that reason, I said that anyone with concerns about the process should contact Jay directly."

"This should be the only point of contact with APERS regarding this RFQ. Contact with APERS Board members or other decision makers regarding this matter prior to selection of counsel may be grounds for disqualification," he said.

Lea said she "was surprised and frankly a bit sad" about Hatcher's text message to Baird.

"Rett has been a long time friend who worked hard to help me get elected to this office, and our families have mutually supported each other. If he had any concerns, I would have expected he would have come directly to me," said Lea, a former Republican state representative from Russellville.


Baird is himself a former lawmaker. The Republican was a representative from Lowell from 2009-15 and then worked for Hutchinson. He was hired as the retirement system director in January and started work in April.

Other former lawmakers have connections to securities monitoring firms:

• Former state Sen. Michael Lamoureux, R-Russellville, who is Hutchinson's former chief of staff, exchanged text messages with Baird on April 9-10 in which he said he is representing the Kessler Topaz law firm.

In a text to this newspaper last week, Lamoureux said he is not a lobbyist for Kessler Topaz.

"The law firm I work [for] works on cases jointly with them," he said, adding that he is counsel at Keil & Goodson.

Lamoureux said he had no comment about Hatcher's text message to Baird.

He said he also has his own lobbying firm, Capitol Square Strategy in Arkansas, and works for DBH Management Consultants, which includes former state Rep. Bruce Hawkins, D-Morrilton, and Washington Advocacy Group. The Washington Advocacy Group also includes Goodson and Keil, according to its website.

DBH Management Consultants represents Bernstein Litowitz Berger & Grossmann, according to the secretary of state's office.

• The Capitol Advisors Group lobbying firm, which includes former Republican Rep. John Burris of Harrison, represents Labaton Sucharow, according to the secretary of state's office.

• Mullenix & Associates, which includes former Rep. Ted Mullenix, R-Hot Springs, represents Kaplan Fox, according to the secretary of state's office.

• WSG Consulting, which includes former Reps. Robbie Wills, D-Conway; Bill Stovall, D-Quitman; and Rick Green, R-Van Buren, represents Wolf Haldenstein Adler Freeman and Herz, according to the secretary of state's office.

• The Perimeter Group, which includes former Reps. Tommy Wren, D-Melbourne, and Ernest Cunningham, D-Helena, represents the Rosen Law Firm, according to the secretary of state's office.

Other lobbying firms representing securities monitoring firms include M&M Strategies, which represents Kessler Topaz; Impact Management Group, which represents the Pomerantz Law Firm; and Paschall Strategic Communications, which represents Block & Leviton, according to the secretary of state's office.

The trustees for the Arkansas Public Employees Retirement System include seven appointees of Hutchinson. The board of trustees also includes Lea and Republican state Treasurer Dennis Milligan.

"I do make appointments to the APERS board, but I expect them to manage the retirement funds and the system based upon their good judgment and business skills," Hutchinson said Friday in a written statement.

"I have not expressed any views to any board member on who should be selected as the securities monitoring firm, nor am I aware of the list of firms that are under consideration."

Photo by Arkansas Secretary of State
Andrea Lea
Lucas Hargraves, Duncan Baird (center), and Don Tilton
Amy Fecher, Bill Cossage, Todd Miles award winner Alisha Curtis, and Kari and Rett Hatcher at Taste of the Finest, a Cystic Fibrosis Foundation, Arkansasa Chapter fundraiser taking place Aug. 17, 2018, in the Statehouse Convention Center's Wally Allen Ballroom in Little Rock.
John Goodson and Arkansas Supreme Court Justice Courtney Hudson Goodson of Texarkana with Del and Jim Coleman of Fayetteville, the UA's new provost and vice chancellor for academic affairs at the Hog Wild Tailgate party Dec. 29 at the NASCAR Hall of Fame, held ahead of the Belk Bowl in Charlotte, N.C.

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