Commissioners’ revelations leads to federal pension probe

When Macon-Bibb County Commissioners Larry Schlesinger and Gary Bechtel’s felt their pleas concerning the pension business were going nowhere, it lead them to contact the Securities and Exchange Commission last year.

The federal agency’s investigation into the county’s pension business spurred a Macon-Bibb County examination of records that appeared to reveal a rigged bidding process in 2014. Former County Manager Dale Walker has been accused of steering three pension funds to be managed by one company, based on various county officials and emails obtained by The Telegraph through the Georgia Open Records Act.

Walker’s resignation last month came on the heels of emails detailing extensive communication between him and former Independent Portfolio Consultant executive Cheryl Underwood, including several emails where he declared his love for her. Emails also appeared to show that Walker allowed some Independent Portfolio employees to manipulate the pension bidding process in 2014.

In late 2016, after multiple conversations with Mayor Robert Reichert about Walker’s role with the bidding, Bechtel and Schlesinger reached out to the federal agency, they said.

“I went to the SEC after repeated attempts to handle the situation quietly in house, but without any success,” Schlesinger said this week.

Bechtel and Schlesinger had several conference calls with the Securities and Exchange Commission, which has declined to comment on the case. In February, the agency subpoenaed Macon-Bibb pension records and documents. The inquiry specifically mentioned communications related to relationships between the county and Independent Portfolio Consultants, including Walker and Underwood.

Bechtel’s antenna was raised when Walker submitted the pension rating matrix in 2014 and recommended Independent Portfolio manage the three Macon-Bibb related plans totaling about $400 million. At the time, the fees Walker said different firms would charge was a red flag in an industry where varying management styles usually mean a wide range of costs, Bechtel said.

Bechtel voted against awarding Independent Portfolio the main pension plan in 2014 because of his concerns. And in 2015, several firms confirmed to the fire and police pension board that the scoring rubric did not accurately reflect what they would charge.

“We went to the mayor hoping he took action but he chose to continue to have faith in Dale,” Bechtel said this week. “We were 99.9 percent certain that this had been manipulated and falsified. Commissioners were led down a primrose path by Dale believing this was objective and this was not. Larry and I trusting our instincts, contacted the SEC.”

Walker resigned April 24 after Reichert said the trust between the two had been “irreparably damaged” during the fallout of the pension investigation. He has said that Walker mislead him, in part, about the reasons he recommended Independent Portfolio.

Since 2014, Independent Portfolio was paid $4.6 million in fees to manage the three pensions: 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.

But in the upcoming weeks, Independent Portfolio will no longer manage any of the pension funds. The company is not among the finalists in the running to manage the main pension plan and former City of Macon plan, which also was recently put up for rebid. The fire and police pension has been under different management since the fall of 2015.

The County Commission also is no longer the board of trustees for the main pension plan after officials decided to form a new board earlier this year. Separate boards manage the two other pension funds.

“If you pay fees, that’s money you cannot pay retirees,” Bechtel said. “As a fiduciary, your goal is to get the best consultant that can meet your investment policy goal of 7.5 percent at the least amount of money fee wise. By eliminating IPC, we’ll get the same level of performance, but we’ll get it less expensive, which keeps more money in the fund.”

Thus far, Macon-Bibb County has been billed about $136,000 in attorneys’ fees as part of the investigation. That includes $25,163 for Walker’s representation, although the county will no longer pay his fees after May, said Macon-Bibb spokesman Chris Floore.

The alleged rigging of the bids could have been uncovered in 2014 if some of the firms that submitted proposals were interviewed by the pension boards, Schlesinger said.

Walker had taken control of the process at the request of boards and submitted a rubric with each of the companies bidding to manage the plans, including the fees they would charge. That document appeared to have been scored by an Independent Portfolio Consultant, according to an email.

“If we had done interviews, that whole matrix document would have immediately unraveled,” Schlesinger said. “What (firms) were actually going to charge us was not what we were presented with. That came out in a definitive way when the fire and police (pension board) did those interviews.”

Walker has said he cannot comment on the pending investigation. Underwood, in emails sent to the Telegraph last week seeking comment, declined to discuss any of the accusations related to the investigation. She did say that there was never any romantic interest on her part with Walker.

Underwood no longer works for Independent Portfolio.

“If it’s determined they broke the law, they need to be prosecuted ... and justice needs to come against them,” Bechtel said. “They need to be held accountable for what they did. I don’t have any soft feelings for anybody who manipulated and violated their fiduciary responsibility.”

This story was originally published May 25, 2017 at 6:07 PM with the headline "Commissioners’ revelations leads to federal pension probe."