SEC Complaint Filed over City of Atlanta Pension Investment
(APN) ATLANTA — Angela Green, a former City of Atlanta employee and member of the Board of Trustees of the City of Atlanta General Employees’ Pension Plan, has filed a complaint with the Securities and Exchange Commission (SEC), Atlanta Progressive News has learned.
The complaint, filed on January 18, 2013, alleges that the investment consultant for the Pension Fund, Larry Gray, steered some 28 million dollar investment from the Pension Fund into a hedge fund company that he owns, without full disclosure to the Board of the conflict of interest.
Green alleges that at the November 07, 2012 Meeting of the Board of Trustees, that Gray presented to the Board several alternative investments for the Board to consider, one of which is a company called GrayCo Alternative Partners II, LP.
As it turns out, the sponsor of “GrayCo Alt II” is Gray & Company, the same company that provides consulting services for the Pension Fund. Larry Gray is the President and CEO of Gray & Company.
The Board voted seven to two approve the contract, with Angela Green and Greg Nash voting against, according to the November 07, 2012 meeting minutes obtained by APN.
All other members voted for it, including Alfred Berry, a policy analyst for the City Council; Jim Beard, the Chief Financial Officer; Yvonne Yancy, Commissioner of Human Resources; Yolanda Johnson, Atlanta Public Schools Board of Education Member; Aretha Sumbry-Powers; Douglas Strachan; and Atlanta City Councilman Aaron Watson (Post 2-at-large).
Berry, who later learned that Gray & Company was the sponsor of GrayCo Alt II, later asked to change his vote at the December 05, 2012 meeting, those minutes show.
Gray & Company implicitly admit to not letting at least certain Board Members, or the Board as a whole, know of the conflict of interest between the two entities.
“My investigation into this matter has revealed that Larry Gray, President and Chief Executive Officer of Gray & Company, personally disclosed that Gray & Company is the sponsor of GrayCo Alt II to at least five other Board members directly in multiple in-person meetings and by telephone last fall and winter,” Marc Hardy, Chief Compliance Officer for Gray & Company, wrote in their letter dated January 23, 2013, to Green, in which they respond to a letter she sent them on January 08.
“Although I understand that Mr. Gray may not have conferred with you personally on this matter, I submit that the multiple disclosures to these other Board members establishes that there was no omission or deception in connection with Gray & Company’s submission of GrayCo Alt II to the Board,” Hardy wrote.
“Finally, it has come to our attention that you may have been sharing your concerns about GrayCo Alt II with others. We are concerned that you are conveying false information about Larry Gray, Gray & Comapny, and/or GrayCo Alt II, and impugning our sound reputation and good will. We respectfully request that you refrain from any such activities,” Hardy wrote.
According to Green’s January 08 letter to Hardy, “We asked about a presentation from the Core Alts II Fund.”
According to the November 07, 2012 minutes, “In response to questions, Mr. Gray stated that… highly sought after managers in this space typically do not make client sales presentations; generally prospective investors make application to become an investor in these private partnership investment vehicles.”
Such a statement by Gray is deceptive because clearly as the CEO of the company sponsoring the fund, Mr. Gray should have been able to answer questions about the fund to the Board, instead of implying that someone else had the information and that it would be improper to request for that someone else to make a presentation to the Board.
According to the November 20, 2012 minutes, “Mr. Berry and Ms. Green asked about the Gray Co Core Alts II, if it was a Gray & Company sponsored investment vehicle and if so, did Mr. Gray tell the board of the ownership at the November 7, 2012 board meeting as neither of them remember that as being part of the discussion. Mr. Gray responded that he thought he had.”
“Ms. Yancy asked that… [Senior Assistant City Attorney Kristen] Denius review the minutes, the plan documents and the Investment Policy statement and provide the board with her legal evaluation of the fiduciary issues, if any, compliance with the Fund’s fiduciary policies and whether or not adequate disclosure had been provided,” the minutes state.
“According to the December 05, 2012 minutes, “Ms. Denius stated that after review of the Investment Policy Statement, the Plan Document and pertinent fiduciary and ERISA statutes, she found no apparent conflicts of interest and no violation of any policy. However, she added that the process, particularly the disclosure of the sponsorship, could have been handled better,” the minutes state.
Green believes there is a conflict of interest because Gray is essentially managing himself, and she also is concerned about the lack of disclosure.
Green added that Mayor Reed ran several candidates against her, unsuccessfully, during the recent Pension Board election because she says Mayor Reed did not want her on the Board.
Green, who no longer works for the City, also tells APN that she received a call from the Law Department of the City of Atlanta asking her to come in to discuss an undisclosed topic, but that she refused to do so if they would not tell her what the meeting was about.