PERA Board travel questioned

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Larry Barker Investigates

ALBUQUERQUE (KRQE) – Over the last four years, New Mexico taxpayers have shelled out thousands of dollars to send board members from the state’s retirement association to far-flung meetings they likely didn’t need to attend.

“We’re dealing with billion-dollar funds,” said state Senator George Munoz, D-Gallup, who serves on the Pensions Oversight Committee. “And if you are going to go invest the state of New Mexico’s money and you do not have a financial background, there should be no point for you to attend that meeting.”

The meetings in question have to do with who is allowed to invest the $13 billion in pension benefits controlled by the Public Employees Retirement Association. That money – which supports 90,000 active and retired public employees – is invested in stocks and bonds by institutional money managers across the United States.

However, before PERA hands over its money, the agency’s professional staff of financial analysts spend months poring over reams of financial documentation to make sure the money managers are up to snuff. It is called a “due diligence” examination, and one of the final steps in the background check process is a site visit to the money manager’s corporate office.

In addition to the professional PERA financial analysts, members of the PERA Board of Trustees tag along on the out-of-state meetings.

For example, Patricia French, a clerk at the Albuquerque Police Department and PERA board member, went to a half-day meeting in Boston in 2010 that cost taxpayers $1,200. Another trip to Boston and New York City cost $1,600. French also took an overnight trip to California, which cost taxpayers $715.

Fellow board member Susan Biernacki, who works for the City of Albuquerque’s Treasurer’s office, has attended three half-day meetings in New York and another in Chicago since 2009 that cost $2,950. Board member Annette Martinez-Varela, who works at the Sandoval County District Attorney’s Office, has been to Minneapolis, Chicago and twice to New York at a cost of $2,715.

Their colleagues, Jackie Kohlasch, an auditor for the state, and New Mexico State Police Captain Roman Jimenez, have been to San Francisco, New York, Minneapolis and Florida at a cost to taxpayers of more than $3,500.

“I think it’s inappropriate,” said Leonard Lee Rawson, a member of the State Investment Council, which also contracts with money managers to invest state funds. “I think it is symbolic of so many things that have gone amuck with our government agencies, and I think that’s why the public in general is just sick of it.”

The Legislative Finance Committee first raised a red flag about the potential waste of taxpayer money in January. That’s when committee members recommended a reduction in PERA’s annual appropriation, in part, to discourage board members from going on site visits.

The due diligence site visits are an important part of the process because billions of dollars and people’s futures are on the line. After the on-site examination, staff members write a report that is submitted to the PERA Board of Trustees for approval.

But, according to News 13’s investigation, the board members who attend those site visits fulfill no role in writing those reports or analyzing the money managers’ investment expertise.

“What are the board members doing there?” Senator Munoz said. “I don’t know. There’s no notes. I couldn’t tell you.”

In fact, the only evidence News 13 could find of board member attendance at the due diligence site visits were plane tickets, hotel bills and restaurant receipts.

PERA board member Martinez-Varela said she thinks the money spent for board members to attend the site visits is worth it. And although she’s not a financial analyst, she said she takes notes when she goes on site visits, though no one but her ever sees them.

“They are just my personal notes,” Martinez-Varela said. “We don’t (submit them to anyone). They’re just our personal notes.”

French said the site visits shouldn’t be left just to technical PERA staff members.

“Because they are not technical visits,” she said. “I do not submit my notes. I use them for review and collaboration.”

Biernacki also stuck up for board members attending site visits.

“They’re not boondoggles,” she said. “If you go back and look through the records of the three visits I’ve taken over the last four-and-a-quarter years … it’s one night back East. It’s not fun.”

Jan Goodwin, head of the Educational Retirement Board, said her agency’s board members don’t attend due diligence site reviews despite having a $10 billion portfolio.

“These are very technical reviews and we want our dedicated staff who have a great amount of expertise in the different areas … to do this work,” Goodwin said.

Lee Rawson, who serves on the State Investment Council, which oversees a $17 billion portfolio, agreed.

“The due diligence process by its nature is technical and we are trying to find out that technical information,” he said. “It would be my opinion that that’s best served by having our investment professionals on staff attend those meetings.”

Senator Munoz said that considering PERA’s current precarious financial position, board members should stay home when it comes to due diligence site visits.

“The PERA is in a $6 billion-dollar deficit,” he said. “You should not be going on trips unless you have the experience and you are going to move us forward and not take us into a bigger deficit.”

PERA board member Jimenez told News 13 he has changed his mind about board member participation in the investment site visits. He says he won’t be taking any more of the out of state trips.

“I feel it’s important that these things be delegated,” he said. “The professionals we have on staff there, I think, are very well-educated, intelligent people that are very knowledgeable about investments. As far as being a cop, I think I’d defer to the professionals in this matter.”

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