The trustees for the Arkansas Teacher Retirement System have decided it's time to seek proposals from securities-monitoring firms to develop an updated list of firms that represent the system in class-action lawsuits.
During their meeting on Monday, the trustees approved a motion to start a request for qualifications "to re-procure the list of security monitoring firms that represent ATRS," said system Executive Director Clint Rhoden.
They also approved two-year renewals of the contracts of the four securities-monitoring firms that have active cases, he said. The firms are Bernstein, Litowitz, Berger & Grossmann LLP; Kaplan Fox & Kilsheimer; Kessler, Topaz, Meltzer & Check LLP; and Labaton Sucharow, he said.
The system's contract with Nix Patterson that ends June 30 won't be renewed, Rhoden said.
The retirement system is state government's largest such agency, with more than $17 billion in investments and more than 100,000 working or retired members.
The trustees' action came after the trustees for the Arkansas Public Employees Retirement System in mid-January decided it's time to refresh that system's list of securities-monitoring firms. That system last screened and hired law firms for securities monitoring in 2013.
The Public Employees Retirement System's current securities-monitoring firms include Bernstein, Litowitz, Berger & Grossmann; Cohen, Milstein; Kessler, Topaz, Meltzer & Check; Labaton Sucharow; Nix Patterson and Keil & Goodson; and Spector, Roseman & Kodroff.
The Public Employees Retirement System is state government's second-largest such agency, with more than $8 billion in investments and more than 75,000 working or retired members.
On Jan. 28, Sen. Kim Hammer, R-Benton, introduced Senate Bill 173, which would no longer exempt a state retirement system's contract to "protect and recover trust assets" from the seven-year limit that otherwise applies.
Jay Wills, interim executive director of the Public Employees Retirement System, said he is holding off on issuing the system's request for qualifications for the securities-monitoring firms until the system trustees' regular board meeting on Feb. 20, "given the legislation that's been filed to move the deal to the Office of State Purchasing."
"They'll either direct me to wait on the legislation or go ahead," he said.
Arkansas Teacher Retirement System Trustee Richard Abernathy said Tuesday that the other trustees on Monday approved his recommendation "to let staff go through the RFQ process and look at all of them."
"But the four that have active cases, we don't want to pull those out, so go ahead and renew their contracts and let them finish out their cases," he said. "Then, let staff come up in the future, here's the three, four, five or up to six securities-monitoring firms that we want to retain."
"With new leadership [Rhoden], they haven't reviewed those firms in several years, so just let them take a new look at 'em. If those are the same ones that we want to keep, keep 'em. If there are other ones out there that are better, we want the best," Abernathy said.
Hammer said Tuesday in an interview that "I think that's a good move" by the Teacher Retirement System's trustees.
"I would like to think the legislation that was looming out there had something to do with their decision to do what is a better and a more prudent way, so I am pleased with what they did," he said. "I'm going to let the legislation hang there a week or two because I think you always need to make sure that if people say they will do something you need, I think you need encouragement to make sure they push it across the finish line all the way."
Abernathy said the trustees' action on Monday "had nothing to do with" Hammer's legislation.
"It was triggered by that mess that we had to go through with Labaton," he said.
"I didn't like the way that the securities-monitoring firm and Labaton and [former Executive Director George Hopkins] went down this past cycle and they had a [referral] fee in there, and so it is just time for our staff to look at it," he said. "Labaton is a good firm, and they may be back on the list. I don't know."
Labaton represents the Teacher Retirement System in a class-action lawsuit against financial-services provider State Street in which there was a $300 million settlement and an award of $75 million in attorneys' fees. A dispute that arose afterward involved a $4.1 million referral fee paid to Texas attorney Damon Chargois.
In testimony to lawmakers in July, Hopkins said that until a special master raised questions about that referral fee, he didn't know that was part of the attorneys' fees awarded. He also testified that he directed the system's law firms not to pay any referral fees and that any fee that is shared with another firm in cases for the system has to relate to work done, has to be reasonable and "can't be just what they call a blanket referral fee."
Hopkins retired Nov. 16 after nearly 10 years as the system's executive director.
Labaton has agreed to pay $700,000 to the class out of the $4.1 million payment to Chargois and pay $2.75 million to other law firms in the class-action lawsuit, according to a report issued by special master Gerald Rosen. Rosen was appointed by U.S. District Judge Mark Wolf to investigate attorneys' fees.
Metro on 02/06/2019
Print Headline: Arkansas Teacher Retirement System plans to update monitoring-firms list