Fifteen securities monitoring firms are vying to be hired by the Arkansas Teacher Retirement System, according to state records.
In February, the system's board of trustees decided it was time to update its list of law firms that represent the system in class-action lawsuits over investments. The board issued a request for qualifications, which is intended to produce a list of viable candidates.
Trustees on Monday approved a change in policy so that "board members shall decline any offer and shall not have any contact with anyone associated with a firm that the board is considering employing ... after requests for qualifications ... have been sent."
The trustees' policy already placed the same restrictions on the board after requests for proposals are sent out.
Securities monitoring 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 and complex and involve many retirement systems.
System Executive Director Clint Rhoden said Monday's policy change wasn't triggered by the ongoing search.
"That was just to make it clear because in the past [the policy] only said [request for proposals] and we deal with [both types of requests]. It was just to bring it into alignment with the general policy," he said.
In June, trustee Danny Knight of Sherwood told his fellow trustees that he had a call from a representative of a securities monitoring firm that he didn't recall and he referred the call to Rhoden because "it's a matter of ethics."
In February, the trustees approved two-year renewals of the contracts with four securities monitoring firms with active cases. Those firms are Bernstein Litowitz Berger & Grossmann; Kaplan Fox & Kilsheimer; Labaton Sucharow; and Kessler Topaz Meltzer & Check, Rhoden said.
Each of these four firms submitted their qualifications to the system, according to a list provided by the Office of State Procurement, which is part of the state Department of Transformation and Shared Services.
The office's records show 11 other firms that submitted their qualifications to the system:
Berger Montague PC; Cohen, Milstein, Sellers & Toll PLLC; Pomerantz LLP; Saxena White P.A.; Berman Tabacco; Block & Leviton LLP; Bleichmar Fonti & Auld LLP; Wolf, Haldenstein Adler, Freeman & Herz LLP; Kahn Swick & Foti LLC; Rosen Law Firm P.A.; and Hagens Berman Sobol Shapiro LLP.
The teacher retirement staff and the Office of State Procurement are evaluating the responses from these firms, Rhoden said, adding the work would be completed in November and presented to the board in December.
Labaton has represented the 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 2018, then-system Executive Director George 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 executive director.
Labaton later agreed to pay $700,000 to the class out of the payment to Chargois and pay $2.75 million to other law firms in the 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.
The Arkansas Public Employees Retirement System's board of trustees decided in mid-January to refresh its list of securities monitoring firms. That board of trustees decided to choose the firms at its November meeting.
Metro on 10/08/2019
CORRECTION: The Arkansas Teacher Retirement System board of trustees will choose securities monitoring firms from among candidates that responded to the agency’s request for qualifications. An earlier version of this article incorrectly stated that the agency also would use a request for proposals.
Print Headline: 15 law firms apply to represent teacher retirees' system