A controversial investment adviser will stay on, at least for now, with two city of Atlanta pension boards, though Atlanta’s mayor previously pushed for the firm’s removal.
Officials at two pension funds, one for the city’s police and the other for firefighters, voted Tuesday to join an external audit of an investment fund tied to adviser Larry Gray. The audit was commissioned by the city’s largest pension fund late last month.
But board members for the fire and police pensions stopped short of looking for another adviser or taking other actions like those of the city’s $1.2 billion General Employees pension. Last week, Gray resigned from advising that board rather than face its questions about why he hadn’t disclosed federal tax liens on his home and a $1 million settlement of a lawsuit that accused him of fraud.
The General Employees board had also moved ahead with plans to hire another financial adviser to replace Gray’s firm, Gray & Co., and to bar future advisers from pitching investment funds in which they have a financial interest.
In July, The Atlanta Journal-Constitution reported that some members of the General Employees board were concerned about Gray & Co.’s dual roles as the pension plan’s investment adviser and as creator of an investment fund that the firm recommended to the pension boards. The city’s three pension plans had agreed to invest $64 million in Gray’s fund.
The AJC also reported last month that Gray hadn’t disclosed the lawsuit settlement and federal liens as required in regulatory filings.
Mayor Kasim Reed said last week that he wanted Gray removed as an investment adviser to all three pension funds, which oversee $2.5 billion in assets on behalf of 12,000 employees and retirees.
But in quiet, back-to-back meetings Tuesday, representatives on the police and fire pension boards didn’t question Gray about the recent revelations. Instead, they followed the lead of the mayor’s appointees to the boards. Chief Financial Officer Jim Beard and Human Resources Commissioner Yvonne Yancy proposed joining the General Employees pension board’s audit of Gray & Co.’s investment fund.
The two boards asked Gray to cooperate with the outside review, to update and correct disclosure forms he filed with state and federal regulators, and to disclose the other clients invested in his fund.
“I appreciate your cooperation,” Beard told Gray.
Gray replied, “We’re absolutely thrilled to comply.”
Yancy, the city’s human resources chief, said any more actions regarding Gray & Co.’s role with the police and firefighters pensions will await the results of the inquiry.
“These boards are very good at making decisions, and they will make one,” she said after the meetings.
Gray said he was pleased with Tuesday’s decisions. “It’s all positive,” he said.
The restrained response of the police and fire pension boards was in stark contrast to the contentious atmosphere at the General Employees pension in recent months.
The U.S. Securities and Exchange Commission subpoenaed documents from the three boards regarding Gray & Co. after one General Employees pension board member, Angela Green, filed a complaint that the firm hadn’t clearly disclosed its ownership of a fund that now holds millions of pension dollars. That pension board has committed $28 million to Gray’s fund, and has invested $10.4 million so far.
Some General Employees board members want to pull the pension’s money out of the fund. But it’s unclear that any of the three pension plans would be able to undo a 10-year investment partnership with Gray & Co. That partnership is separate from the consulting agreement that Gray recently ended with the General Employees board.
The police and fire pensions have committed $36 million to Gray’s investment partnership. Officials of those two pension funds have said Gray did disclose his firm’s ownership of the investment fund to them.