The trustees of the $11.4 billion District of Columbia Retirement Board (DCRB) said the group has “cooperated fully” with a federal investigation into the financial transactions of the board, which manages the city’s pension fund for retired teachers, police officers, and firefighters. The investigation sought documents related to payments to investment managers and investment consultants.
The DCRB is currently the subject of a whistleblower lawsuit filed by Erie Sampson, the retirement board’s general counsel, who said she was placed on administrative leave in retaliation for notifying officials about problems in the retirement board’s accounting and governance, and for cooperating with the investigation. Former US Attorney for the District of Columbia Channing Phillips issued a subpoena in August seeking documents from the DCRB as part of a criminal investigation, according to The Washington Post.
While the board acknowledges receiving the subpoenas, it refutes reports that it is the target of a criminal investigation. It said it received two subpoenas in 2020 and one in 2021, and that each subpoena requested documents and asked the DCRB not to disclose their existence so as not to impede any investigation.
“DCRB will aggressively defend itself in court against the meritless lawsuit and has cooperated fully with the investigation,” the board said in response to news reports about the whistleblower suit and the federal investigation. “In the meantime, DCRB is compelled to respond outside of court so that the District of Columbia’s active and retired teachers, firefighters and police officers know that the financial health of their pension remains strong.”
The board noted that the actuarial funded status of the pension was 112.2% as of the end of 2021, with more than $11 billion in assets. It said the investment fees it pays are “in line with the market and are directly attributable to the strong investment returns DCRB has achieved.”
And in response to Sampson’s claims of retaliation, the board said it “does not undertake any adverse employment action against employees for assisting DCRB in complying with a governmental inquiry.”
However, in an interview with The Washington Post, D.C. Council Chairman Phil Mendelson said he didn’t think Phillips was looking at the retirement board for benign reasons. “I think the US attorney is concerned about what is behind what appear to be misstatements in the accounting.”
The DCRB is comprised of 12 trustees, half of whom are elected by the active and retired teachers, police and firefighters of the city, with three appointed by the DC Council, and three named by the mayor. The funded level of the retirement plan is major reason why the city receives positive ratings for its municipal bonds and can borrow money at a favorable rate.
According to the Post, Sampson alleges in the lawsuit that Gianpiero Balestrieri, the board’s executive director, suspended her to prevent her from complying with one of the subpoenas. The lawsuit also alleges that there is a wide gap between the amount the retirement board is paying investment managers and the amount the board reports it is spending on management fees. For example, Sampson alleges that the DCRB spent $93 million on investment management fees in 2018, but only reported $15 million in fees in its annual report.
In its 2020 annual financial report, the DCRB defines traditional investment managers as those who invest primarily in public equity, real assets, and fixed-income securities. However, it said fees for nontraditional, private market managers are “often netted against investment income,” and that “as a result, those expenses, including performance-based fees, are not included.”
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Tags: Channing Phillips, DCRB, District of Columbia Retirement Board, Erie Sampson, Gianpiero Balestrieri, Phil Mendelson, The Washington Post