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The Arkansas Public Employees Retirement System Board on Wednesday delayed a decision about which securities monitoring firms to hire until their next meeting in November.

The action came after trustee David Hudson's motion to hire the top six firms ranked in a staff analysis of 18 law firms failed for the lack of a second from any of the other six trustees at the meeting.

Securities monitoring firms represent the system in class-action lawsuits over investments. The firms are paid on a contingency fee basis with payments determined by a judge and coming out of any settlements and awards. Potentially millions of dollars are at stake in successful cases that are large, complex and involve many retirement systems.

In a voice vote with no dissenters, the board approved trustee Daryl Bassett's subsequent motion to defer a decision until the next quarterly meeting.

"I don't see the urgency of moving us forward and making a decision now," said Bassett, adding that the trustees can seek additional information between now and November.

System Executive Director Duncan Baird, who started work for the agency in April, told the trustees that he's started interviewing candidates to fill the system's legal counsel post, which became vacant with Jessica Middleton's resignation, effective July 26, to take a private sector job.

Baird also said that system Deputy Director Jay Wills, who is also an attorney, is retiring at the end of this month.

Trustee Andrea Lea, who is the state auditor, did not participate in Wednesday's discussion and vote about hiring securities monitoring firms. She left the meeting room as the discussion began.

Lea said in a written statement later that she recused herself because "as I disclosed early in this process, my office has a contingency contract with one of the firms who submitted qualifications.

"Simply, out of an abundance of caution to not give any appearance of favor or impropriety, I recused myself from this decision," Lea said.

Wills that said he, Arkansas Teacher Retirement System attorney Laura Gilson, and Office of State Procurement attorney David Withrow independently conducted their own quantitative analysis of the firms seeking to be awarded the securities monitoring work. He said they left the qualitative analysis to the trustees.

The six firms with the highest average rankings based on the analysis are Bernstein, Litowitz, Berger & Grossmann; Cohen, Milstein, Sellers & Toll; Hagans Berman; Labaton Sucharow; Bernstein Liebhard along with Quinn Emanuel; and Scott & Scott, according to a copy of the rankings.

The Nix Patterson law firm, working jointly with the Keil & Goodson law firm, was ranked last of the 18 firms.

Besides Bernstein Litowitz, Cohen Milstein, Labaton Sucharow, and Nix Patterson/Keil & Goodson law firms, the system's current securities monitoring firms also include Kessler, Topaz Meltzer & Check LLP, and Spector, Roseman, Kodroff & Willis.

All of the current firms reapplied except for Spector, Roseman, Kodroff & Willis, after the trustees in mid-January, at Lea's suggestion, decided it was time to refresh their list of firms.

The system last hired such firms in 2013. The system issued a request for qualifications for firms on April 15 and the deadline for the applications was April 30.

After the trustees directed the staff on May 15 to develop a rating system for firms seeking a contract and the board asked Lea to assist the staff, the state auditor wrote in an email to Wills dated May 29 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 bring us a list of recommendations."

In the May 29 email, Lea noted that the state auditor's office is working with the Cooper & Kirk and Kessler Topaz law firms on a bond-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.

Lea's decision not to help develop a scoring system for the securities monitoring firms came after lobbyist Rett Hatcher -- a partner at Gilmore Strategy Group, which represents Berger Montague law firm -- pointed out to Baird in a May 16 text that Lea's 2014 campaign reported receiving $2,000 campaign contributions each from Texarkana attorney John Goodson, his law firm, his law partner and his daughter in the primary election. Goodson's law firm also contributed $2,000 to Lea for the 2014 general election, according to her campaign finance reports.

The Berger Montague law firm is one of the 18 law firms seeking to be a security monitoring firm for the system.

Lea has said that she wasn't aware of the text from Hatcher to Baird before she decided against helping develop the scoring system and that she learned of the text from a reporter for the Arkansas Democrat-Gazette. Hatcher's text message to Baird was obtained by a public records request under the Arkansas Freedom of Information Act.

Lea, a Republican from Russellville, said Wednesday that Hatcher's text message about Goodson-related contributions to her 2014 campaign had nothing to do with her decision to recuse from discussing and voting on hiring the monitoring firms.

Asked if he had any comment about Lea's recusal, Hatcher replied in an email, "No."

Metro on 08/22/2019

Print Headline: Securities monitor choice paused

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