KY Governor’s Actions with Pension Systems Questioned

May 25, 2011 ( – Following reviews of the roles of placement agents with Kentucky’s retirement systems, some actions of Governor Steve Beshear are being questioned.

The Lexington Herald-Leader reports that at least twice in recent years, Beshear’s office called the Kentucky Retirement Systems to suggest meetings with two of the governor’s Democratic political supporters who were working on behalf of private investment companies. The supporters were Mark Guilfoyle, a Northern Kentucky lawyer and lobbyist who helped lead Beshear’s 2007 transition team, and Jill Daschle, wife of the then-executive director of the Democratic Governors Association and daughter-in-law of former U.S. Senate leader Tom Daschle (D-South Dakota), according to the news report. 

Guilfoyle worked with Fort Washington Investment Advisors, based in Cincinnati, although he said in an interview that he was not paid, and Daschle is managing director of investor relations at EnTrust Capital, based in New York.  

“The only reason I took the meeting is that I was called by the governor’s office and asked to meet with Guilfoyle and his client,” said Mike Burnside, former executive director of Kentucky Retirement Systems who was fired last month (see KY Retirement System Fires Executive Director). “I received a similar request from an aide to the governor to meet with Jill Daschle, (who) had a client trying to do business with KRS as well.”  

Beshear spokeswoman Kerri Richardson said such calls are meant to be “referrals,” not endorsements intended to pressure state officials on anyone’s behalf. “Every day, the governor’s office receives requests for information or offers of services, which are then routed to the appropriate agencies,” Richardson said, according to the Herald-Leader. “The governor’s ultimate objective for the retirement system is the protection and growth of funds for the benefits of hundreds of thousands of current and retired public employees.” 

Ultimately, KRS rejected Fort Washington’s investment offer, but the company won a contract to manage $200 million in high-yield bonds for the state’s other sizable pension fund, the Kentucky Teachers’ Retirement System. Officials at KTRS said they chose the company through open competition, and they were not advised by the governor’s office, Guilfoyle or any other third party. 

The news report said that in September, the U.S. Securities and Exchange Commission opened an “informal inquiry” into KRS’ use of “placement agents” middlemen who help sell investment services to pension funds. A review last year disclosed $15 million in agent fees, angering several KRS board members, who called the fees unnecessary (see KY Pension Officials Release Placement Agent Audit).   

State Auditor Crit Luallen is in the final stages of her own broad examination of KRS, including the role of placement agents. It is scheduled to be presented next month to State Senator Damon Thayer’s legislative committee.