Retiree groups keep consultant despite reports

• By SARAH CHACKO
• Advocate Capitol News Bureau
• Published: Jul 10, 2009 - Page: 12A

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The two largest statewide retirement systems using an investment consultant under scrutiny by the U.S. Securities and Exchange Commission say they are sticking by the consulting group.

The Consulting Services Group, which advises five Louisiana systems, denies claims by the SEC, which has threatened a lawsuit regarding alleged kickbacks given to broker-dealers for directing a New York retirement system’s pension funds to them.

“We will take our case up the chain of command at the SEC and will pursue every possible administrative avenue available to us to forestall the filing of a lawsuit that we believe is meritless and misguided,” stated a June 30 letter CSG officials wrote to their clients.

An article published in June by Forbes magazine reported that CSG steered pension funds into Ponzi schemes run by Bernard Madoff and another group.

A Ponzi scheme is a fraudulent investment operation that uses money from new investors to pay off earlier investors.

Bob Rust, administrative director of the Municipal Employees’ Retirement System of Louisiana, said he is not aware of any investigation of CSG regarding Madoff. Rust questioned the validity of the reports.

The municipal employees’ system, one of the five that use CSG as a consultant, has about 10,800 active and retired members and $675 million in assets.

“We do due diligence about as thorough as you can do it with all money managers to mitigate any kinds of problems we might have,” Rust said. “Our board is very satisfied with the communication we’ve had from CSG and the level of service that they’ve provided.”

State Sen. Butch Gautreaux, D-Morgan City and chairman of the Senate Retirement Committee, said CSG’s Executive Vice President and co-founder Joe Meals brought the reports up at a recent meeting of municipal employees’ systems in Alabama.

“He assured us that they have opened up their books, opened up everything,” Gautreaux said. “He felt confident that everything will be fine.”

Steven Stockstill with the Firefighters’ Retirement System of Louisiana, another CSG client, said he is aware of the lawsuit involving the New York pension plan, to which CSG is not a party, but nothing relating to the Ponzi schemes.

“The FRS board conducted an exhaustive inquiry into CSG’s involvement in these matters and took the matter under advisement with no immediate action being needed or taken,” Executive Director Stockstill said in an e-mail.

FRS has more than 7,400 active and retired members and $865 million in assets.