After six years, the Arizona Public Safety Personnel Retirement System board agreed to pay more than $170,000 in retroactive bonuses owed to three executives and the estate of a deceased investment executive.
Paying the incentive bonuses was tied up for years amid probes that the quartet had inflated the plan’s investment performance to merit the extra pay. Multiple investigations cleared them, however.
The money finally paid to Mark Steed, the $10.3 billion organization’s chief investment officer, Lead Portfolio Manager Shan Chen, and former CIO Ryan Parham, who retired last year, totaled more than $120,000. The board granted another $51,481 to the estate of Marty Anderson, the onetime chief equity analyst, who died in 2016.
The delayed bonuses in question were owed for the four men’s performance in fiscal year 2013. But then the allegations arose that they had manipulated real estate valuations to collect bonuses on the pension fund’s higher returns. The investment officials chose to suspend receipt of the bonuses during scrutiny of the matter.
Investigations followed, conducted by the trustees, independent auditors, Arizona’s auditor general, and federal authorities. In 2014, the investigators revealed they found no evidence to support the allegations.
The PSPRS Board of Trustees decided to “resolve its existing legal liabilities and to compensate members of the investment team who were owed but never received past incentives,” PSPRS Communications Director Christian Palmer told CIO. The trustees, he added, are “committed to moving forward to improving the financial health of our system.”
Why the delay? William T. Buividas, the board’s chairman and Phoenix police officer, said the issue was on the public safety pension board’s to-do list last year, yet due to an oversight, the issue didn’t come to a vote in open session. That was fixed Monday, when the board unanimously approved the settlements.
Palmer said that PSPRS no longer offers incentive payments for investment personnel but instead seeks to offer competitive pay and benefits to attract and retain staff. He said the plan attracts national accolades for its risk-adjusted portfolio with high alternative investment exposure.
“A lot of public pensions use incentive pay but I think in our unique experience, past boards found that it’s not hard for media and the public to draw the wrong conclusions,” he said. “The PSPRS portfolio is built to protect against losses that could create full-blown budget emergencies for local governments. A lot of people will have a hard time grasping that concept or how well you execute a risk-adjusted strategy when we’re in the middle of a historic bull run.”
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