Secret emails raise ‘grave concern’ over multimillion-dollar pension dealings

Dale Walker, center, is seen during a 2011 budget presentation before the Macon City Council. Walker recently resigned as the Macon-Bibb County manager in the midst of a Securities and Exchange Commission investigation tied to pension plans and a consulting firm.
Dale Walker, center, is seen during a 2011 budget presentation before the Macon City Council. Walker recently resigned as the Macon-Bibb County manager in the midst of a Securities and Exchange Commission investigation tied to pension plans and a consulting firm. bcabell@macon.com

Macon-Bibb County’s former county manager steered the county’s $400 million pension business to one particular company and even allowed that company to manipulate the evaluation process in its favor, according to county officials and a review of hundreds of emails.

Copies of about 1,500 emails that The Telegraph obtained through the state’s Open Records Act detailed communications between Dale Walker, the former county manager, and a senior consultant with Independent Portfolio Consultants dating back to 2014, including one email in which Walker expressed his love for the consultant.

The emails, most of which Walker sent from his work email account, also are among documents that federal investigators with the Securities and Exchange Commission are reviewing as part of their probe of pension dealings.

In 2014, Walker was tasked with putting together requests for proposals, also known as RFPs, for companies interested in managing the county’s three pension plans. The pension plans include two closed plans, Division A of the Macon-Bibb County Pension and Retirement System (the plan for former city of Macon workers); the Macon-Bibb County Fire & Police Department Employees Retirement System; and the open Macon-Bibb County Pension Plan.

The process of putting together such a request is common practice in government work as an official guideline of how companies can bid on certain projects. The RFPs are developed and put out on a certain date, ensuring that companies bidding on a proposal are on an equal playing field.

In September 2014, following the request-for-proposals process, Walker recommended to each of the three pension trustee boards that Independent Portfolio Consultants manage the plans.

I recognize that we have not heard Dale’s side of the story, but I am afraid he is going to have a very difficult time providing a reasonable justification for his actions

Macon-Bibb County Attorney Judd Drake wrote in a letter to county officials

But 2 1/2 years later, on April 24, Walker resigned abruptly, as Macon-Bibb officials uncovered emails detailing his extensive communications with a former IPC senior consultant, Cheryl Underwood. About two months earlier, Macon-Bibb County had been notified that the Securities and Exchange Commission was subpoenaing records from the county as part of its investigation related to the pension plans.

“I was surprised, even shocked and dismayed, by the content of the emails that were recovered in response to the SEC subpoena because they directly contradicted on numerous fronts, numerous issues what Dale had been telling me in response to my direct questions,” Macon-Bibb County Mayor Robert Reichert said in an interview with The Telegraph.

The SEC inquiry specifically mentioned communications related to relationships between the county and Independent Portfolio Consultants, including Walker and Underwood. (Underwood no longer works for IPC.)

After the SEC subpoena, the Atlanta law firm Thompson Hine was hired to help the county comb through thousands of documents. A letter from County Attorney Judd Drake to Reichert outlined the “grave concern” he had after uncovering some of Walker’s emails.

The search showed that in July 2014, Walker sent an email to Underwood stating that another then-Independent Portfolio employee, John Whitledge, had actually prepared the request for proposals for the three Macon-Bibb pension plans, Drake wrote.

And an attachment to an Aug. 22, 2014, email, which included the spreadsheet used to rate each of the companies bidding on the plans, was sent by Underwood to Walker and appeared to have been scored by an IPC employee. Drake said an electronic signature indicated that another IPC employee had authored the document.

“This spreadsheet has been the subject of much debate, especially as it relates to the fee analysis section,” Drake said in the letter.

Drake noted that about 100 emails had been sent between Walker and Underwood from July to August 2014 pertaining to the pension bidding process.

“I recognize that we have not heard Dale’s side of the story, but I am afraid he is going to have a very difficult time providing a reasonable justification for his actions,” Drake wrote in the letter.

Walker and Underwood relationship

The lines are blurry on the relationship between Walker and Underwood, although multiple emails indicate Walker’s romantic interest in her.

Walker and Underwood’s association dated back to when the two worked with the Michigan Municipal Employees Retirement System. Walker left his position as chairman of that pension board about 10 years ago.

But on March 18, 2014, Walker sent a letter listing 12 “thoughts” he wanted to express to Underwood. He mentioned how fortunate he was that God reunited the two in 2013. He described her “jaw dropping” and “unsurpassed beauty.”

“My desire to live the rest of my life with you blissfully and happily is great but the reality of the dream is questioned,” Walker wrote.

Under reason No. 9, he said, “My love for you is amazing given the little time we are together, lack of physical contact, limited telephone conversations, yet there is a great bond of kindred spirit.”

In another email in the spring of 2014, Walker forwarded to her an invitation to a “masquerade dinner” at a Warner Robins restaurant with the words, “Let’s go! Sounds fun.” He also forwarded to Underwood a message about a dance contest, with Walker adding, “Ready to enter? I would love to learn ballroom dancing with you.”

A Sept. 5, 2014, email indicates that Walker purchased something from Macy’s for Underwood, although it does not show what the merchandise was.

Underwood never replied to any of those four emails, according to the documents provided to The Telegraph.

Here comes an interesting one from a New York firm. Think they are putting their toe in the water. Need someone, like IPC, that is willing to be flexible and work within the existing system.

Dale Walker in an July 31, 2014, email to Cheryl Underwood

But that connection paid off in early 2014, when IPC was hired to manage the short-term investment of the government’s cash on hand. Shortly thereafter,Walker recommended to the Macon-Bibb County Commission that Independent Portfolio Consultants, where Underwood now worked, to manage Macon-Bibb’s “other post-employment benefits,” or OPEB fund. Walker stated in a June 26, 2014, email that it was a chance for Underwood and IPC to showcase their abilities to Macon-Bibb officials.

An OPEB includes benefits, such as health care, that are not part of a pension plan, according to the Governmental Accounting Standards Board.

“Once you get us fully invested and better returns, then we can start talking about the General Employees Retirement System and the Police & Fire Retirement System,” Walker wrote to Underwood. “Together about $200 million.”

He concluded the email by saying, “Have a great day my friend and let’s knock the socks off this OPEB fund and show the world IPC is a real contender!”

Throughout the pension bidding process, emails continued between Walker and Underwood — and sometimes Whitledge. One email that Walker forwarded to Underwood contained questions that another investment company had asked Walker about the request for proposals.

“Here comes an interesting one from a New York firm,” Walker said in the July 31, 2014, email. “Think they are putting their toe in the water. Need someone, like IPC, that is willing to be flexible and work within the existing system.”

Walker, reached at his apartment Thursday night, said his attorney has advised him not to comment on the investigation.

The SEC declined to comment on the case. Two Independent Portfolio officials did not respond to emails or phone messages from The Telegraph.

Whitledge did not respond to an email and phone message left by the Telegraph.

Underwood said she couldn’t discuss whether any IPC employees had crafted the request for proposals or scored the bids. However, she said there was never any romantic interest in Walker on her part. She said the compensation she received as a consultant for the plans was similar to the 600 other IPC investment advisers.

“I never had nor will have a romantic relationship with Dale Walker,” Underwood said in an email to the Telegraph. “I do not have nor have I ever had any desire to be anything but professional and platonic friends. I never gave him gifts in excess of a professional gift basket at the holidays. I always performed ethically and professionally as a fiduciary and in the best interest of my clients. The accounts outperformed their respective benchmarks net of fees.”

She added, “It is very sad and unfair that intelligent, professional women get victimized by men who chase us. Even when you tell them to stop, they don't give up. We are the ones who's (sic) reputation is damaged when we are just trying to do a good, professional job just like a man.”

Commissioners’ concern

Two county commissioners say that Walker misled them into supporting Independent Portfolio Consultants.

From January through September 2016, IPC charged fees of $500,000 for the $107.5 million county plan and another $381,000 for the $74 million Macon plan. Another company managing the fire and police plan charged $207,000 in fees.

Walker had touted his previous career experience working with retirement plans, saying that he could handle the extensive process after pension board representatives asked him to review the bids.

Before consolidation of Macon-Bibb County, Merrill Lynch had managed the retirement plans. But after the company decided to get out of the municipal pension management business, Macon-Bibb’s three pension boards had to find a new investment consultant.

“Dale basically persuaded us all that IPC was the group to go with it,” said Macon-Bibb Commissioner Larry Schlesinger. “At that time we had absolutely no reason to doubt that Dale was telling the truth.”

In a Sept. 1, 2014, memo to commissioners and the mayor, Walker outlined the process he said he had followed. His technical expertise, along with Macon-Bibb Human Resources Director Ben Hubbard’s experience in dealing with employee benefits, were a good combination, Walker said.

To prevent any bias, they both ranked the companies independently, with each selecting Independent Portfolio Consultants as the top choice for each of the three plans, the memo said.

“IPC brings to this community at this point in time an ability to be flexible, creatively conservative yet understands the investment laws and guidelines, has the platform be a “manager of managers” offering independence and transparency,” Walker said in the note.

Commissioners approved Independent Portfolio Consultants to manage the Macon-Bibb general employee plan in a close vote on September 2014. Commissioner Gary Bechtel has said he voted against the company, in part, because he wanted more opportunity to vet the companies that bid.

But with no interviews, IPC became the new manager based on the recommendations of Walker and Hubbard.

Schlesinger said he met with the mayor in January 2015 to discuss some of the uneasiness he felt about Independent Portfolio and Walker.

Schlesinger and Bechtel would later fail to get the pension management re-bid after learning that Underwood and Walker had a previous professional relationship, something that Walker did not mention in 2014. Bechtel said at that time he wasn’t arguing against Independent Portfolio’s performance, but he wanted a new bid process to avoid what he called “crony capitalism.”

Schlesinger recalled a January 2015 meeting with Reichert.

“I said to (the mayor), ‘I think that Dale fudged the numbers and basically controlled the process selection of IPC,’” Schlesinger said of the meeting. “Neither Gary or I were very impressed with Cheryl or John Whitledge compared with the Merrill Lynch guys before. They really didn’t seem to have a grasp of what was going on.”

Reichert said he remembers having several conversations with Schlesinger and Bechtel about their concerns. The mayor said he remembers using an analogy at one point. It was along the lines of a car salesman slightly embellishing the performance of a car, but in the end the vehicle still drove well.

“So you really have no complaints about the performance of the car. Do you want to take it back and say the salesman misrepresented?” Reichert asked.

Schlesinger said the mayor suggested that he discuss his concerns with Walker. That, however, led to Walker’s downplaying the severity of Schlesinger’s concerns, the commissioner said.

At that point “the only leg” Schlesinger said he had to stand on was that Walker knew Underwood while they had worked in Michigan.

He said Walker’s response to Schlesinger’s questions about the bidding process was a dismissive: “So?”

But when Walker resigned on April 24, 2017 — effective immediately — saying that he was retiring, there was no official statement from Walker about the suddenness. Reichert said he did not ask Walker to resign, but did discuss the fallout from the SEC investigation.

“I told him that our relationship had been irreparably damaged, and he resigned,” Reichert said.

But for Reichert, the performance of Independent Portfolio Consultants was never in question. He said he believes Walker’s push for IPC was because the county manager believed it was in the best interest of the county.

“They did do us a good job. They did make money for us,” Reichert said. “No money was missing, but Dale also had personal reasons for choosing” Independent Portfolio Consultants, he said.

The company still manages the Division A former city of Macon plan. A different consultant now manages the fire and police retirement system, while a new bid process is under way for the main Macon-Bibb plan and commissioners have established a new pension board.

Battle lines

The battle lines forming over the main Bibb County pension plan were outlined in a Nov. 25, 2016, article in The Telegraph.

Bechtel and Schlesinger cited a need for a better return on investments from Independent Portfolio, a claim that Underwood, and others, disputed. At the time, the two plans still under the Boca Raton, Florida-based company’s management posted asset gains of at least 5 percent over the first 10 months of the year, which was a good return on investment, Underwood said.

Walker, Reichert, and Underwood also said at the time that comparing the management styles used for the plans — active and passive — and differing regulations made it unfair to compare performances.

A lot of times, we spend so much time in dealing and worrying about small things in the community — a bump in the road or a piece of trash — and things like this is happening behind the scenes where (someone) is driving business to friends and business colleagues.

Macon-Bibb County Commissioner Al Tillman

But Bechtel and Schlesinger also reiterated their belief that Walker had rigged the scoring matrix in favor of Independent Portfolio. When some companies being interviewed during a 2015 rebid of the fire and police pension questioned the original bidding process, it added fuel to the commissioners’ claims.

Bechtel and Schlesinger, who also serve on that pension’s board of trustees, asked several companies if the scoring matrix used by Walker accurately reflected how much they would charge to manage the plans. The company representatives said they were unsure how those figures were determined.

Walker, however, later countered that he performed some calculations on the bids because different types of fee structures were proposed by each of the managers.

County Commissioner Al Tillman said that while officials are working on issues that affect the community, Walker, who was essentially the county’s CAO, was using his influence to help out a friend, in his opinion.

“A lot of times, we spend so much time in dealing and worrying about small things in the community — a bump in the road or a piece of trash — and things like this is happening behind the scenes where (someone) is driving business to friends and business colleagues.”

Stanley Dunlap: 478-744-4623, @stan_telegraph