The Lexington Herald-Leader said the audit found an earlier relationship between placement agent Glen Sergeon and former pension CIO Adam Tosh who resigned last month. The audit shows Surgeon made almost $6 million in several KRS pension deals.
According to the newspaper, Sergeon and Tosh knew each other when Sergeon was with Merrill Lynch and Tosh was on the investment staff at a Pennsylvania state pension program. Sergeon discussed the previous relationship during a KRS audit interview.
“Due to this prior working relationship and the continuous use of Mr. Sergeon, there could be a perceived appearance of preferential treatment,” the audit report said, according to the Herald-Leader. KRS executive director Mike Burnside said Tosh quit the KRS to accept a private-sector position and was not forced out because of the audit disclosures.
According to the news report, the audit recommended KRS staff be required to publicly disclose all such connections with placement agents – a step beyond the policy the pension program put in place last year mandating disclosure of placement agent names and fees as well as current or past payments made to public officials.
The audit said Sergeon has provided services in Kentucky pension deals under several different business names, including Bleecker Street Partners, Cazanave and Co., and Diamond Edge Capital Partners. There is no evidence this is improper, the audit report said, but KRS financial advisers described it as “an unusual practice.”
Pay to play issues have been the subject of federal and state probes in a number of states including California and New York and have prompted a variety of state and local public pension systems to institute tougher placement agent disclosure rules (see NYC Redraws Pension Placement Agent Regs).