Trustees with the Arkansas Public Employees Retirement System have decided it's time to refresh the system's list of securities-monitoring law firms, which represent the system in class-action lawsuits.
The system last screened and hired law firms for securities-monitoring services in 2013, said Jay Wills, the system's interim system executive director.
The system participates in five class-action lawsuits and hasn't signed on to participate in a new class-action lawsuit for a few years, he said.
To look for such firms, the system issues a request for qualifications for those services. In 2013, it received about 14 responses, Wills said.
During a special meeting Wednesday, the trustees voted to approve Trustee Andrea Lea's motion for the system to issue a new request for qualifications.
"I would like us to consider re-evaluating the list," said Lea, who is the state auditor and a Republican from Russellville. "If I not mistaken, the only ones on the list are the ones that come to us and we are not paying them anything. This is about them going out and finding the money and bringing it back to us and then taking a percentage."
Wills, who is an attorney, told the trustees that the firms "will be also be happy to tell you that if you drop a [figurative] concrete wall in front and just decline to consider any of it [class-action lawsuits] it may be violating the fiduciary duty to seek recovery."
"Now it is always said in very nice terms, but you get where they are going," Wills told the trustees.
Trustee Larry Walther, who also is director of the state Department of Finance and Administration, said, "In my mind, it's like we need to refresh this list that we have.
"What you will probably see is some will be refreshed and they will stay [and] some might go and some might come," he said. "At least, this board, as we move forward, would say that have looked at the field and it is probably a limited field of people who does this kind of work."
According to Wills, the system's current securities-monitoring firms include:
• Bernstein, Litowitz, Berger & Grossmann.
• Cohen, Milstein.
• Kessler, Topaz, Meltzer & Check
• Labaton Sucharow.
• Nix Patterson of Texarkana, Texas, and Keil & Goodson of Texarkana, Ark., which work jointly.
• Spector, Roseman & Kodroff.
All the firms have offices in multiple states except for Nix Patterson and Keil & Goodson, Wills said. Kessler, Topaz, Meltzer & Check is based largely in Pennsylvania.
Labaton Sucharow began working for the system since "relatively recently," Wills wrote in a email to this newspaper. "One of our regular lawyers from another firm left that firm to work for Labaton and he took our case with him. ... They were not a firm we selected in 2013, but I felt compelled to list them for my trustees as they are working on one of our cases now."
Labaton Sucharow represents the Arkansas 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. The case involved a dispute over a $4.1 million referral fee paid to Texas attorney Damon Chargois.
In testimony to lawmakers in July, then-system Executive Director George Hopkins said that, until a special master raised questions about that referral fee, he didn't know that fee 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, be reasonable and "can't be just what they call a blanket referral fee."
Hopkins retired Nov. 16.
After the Teacher Retirement System's trustees meeting Dec. 3, Trustee Richard Abernathy said he is considering asking fellow trustees not to renew the system's contract with Labaton Sucharow. Abernathy said Monday that he is still considering asking that or possibly asking the trustees to rebid for securities-monitoring firms.
Lea also serves on the Teacher Retirement System's board of trustees.
She was asked by the Arkansas Democrat-Gazette whether her objectives were to eliminate Labaton Sucharow from working for the Public Employees Retirement System or whether she wanted to hire a particular firm.
She said in a text message, "It's good government practice to periodically re-procure the list so if a vendor wants to do business with the state they have a fair chance."
Through finance department spokesman Scott Hardin, Walther said a new search for securities-monitoring firms "isn't driven by any specific new firm or hope to eliminate an existing firm."
"Through this process, new firms have a chance to be considered."
Teacher Retirement System board Chairman Jeff Stubblefield was asked Thursday by the Democrat-Gazette whether that system's trustees still plan to consider not retaining Labaton, issuing a similar request for qualifications for the firms, or another option.
Stubblefield said he has been "informed that Labaton is still representing us in other cases and I feel it would be in our best interest to resolve those cases before we make a judgment on their status."
"Although the State Street case is very near the end, it is not over," he wrote in an email to this newspaper. "Also, they are representing us in the Goldman Sachs case which is nowhere near the end. I do know that Labaton has prevailed in a couple of appeals in the Goldman case. ... ATRS has a decent amount of skin in the Goldman case."
Stubblefield also referred to the special master's report regarding Labaton and Hopkins.
In a supplemental report filed Oct. 10, special master Gerald Rosen, who was appointed by U.S. District Judge Mark Wolf to investigate attorneys' fees, wrote, "Labaton acknowledges that its $4.1 million payment to Damon Chargois did not constitute a case-specific referral fee, as those are commonly understood across the legal industry."
Labaton agreed to pay back $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.
" Labaton further acknowledges that Chargois did not commit to work on, nor accept responsibility for, the representation of ATRS in the prosecution of the State Street case, and that these factors should have led to a more robust discussion with its client and the Court, prior to awarding attorneys' fees," the special master wrote.
The Teacher Retirement System's securities-monitoring firms include Bernstein, Litowitz, Berger & Grossmann; Kaplan Fox & Kilsheimer; Kessler, Topaz, Meltzer & Check LLP; Labaton Sucharow; and Nix Patterson, said Clint Rhoden, executive director of that system.
The Teacher Retirement System last issued a request for qualifications for securities-monitoring firms in 2012, Rhoden said.
NW News on 01/22/2019
Print Headline: Arkansas pension system to review securities-monitor list