KY Retirement System Questions Property Purchase

May 26, 2006 ( - The Kentucky Retirement Systems is investigating its purchase of land for $725,000 from someone who paid $450,000 for it less than two months earlier.

The Louisville Courier-Journal reports that the retirement systems’ executive director William Hanes said its board also has questions about a portion of the sale price, $25,000 paid for “personal property” that staff officials have been unable to identify, and a $28,000 commission paid to a Frankfort realty company.

Hanes said the governor’s office, state auditor and attorney general have been asked to examine the purchases for wrongdoing, according to the news report. He declined to say whether the transaction is related to recent resignations of Chief Operations Officer Gordon Mullis and Chief Investment Officer John Krimmel.

The news report said records released by Hanes in response to an Open Records request show that Mullis and Krimmel wrote a recommendation on behalf of the staff to purchase the property for up to $700,000. A memo from Mullis to Hanes mentions the need of the systems for more space.

Eric Wampler, general counsel for the retirement agency, told the newspaper many documents required for such transactions were not produced in this case, saying the board did not receive a bill of sale, inventory or valuation regarding the $25,000 of personal property, or contract regarding a $28,000 real estate sales commission.

In December, Caroline Bevins-Taylor had bought the property from a church for $450,000, with the intention of putting an animal hospital there. Even though she failed to win a local zone-change in January for the hospital, she said she still wanted to hold onto the property, but she agreed to sell it for what she said was a total of $725,000 after she was approached by retirement systems officials.

Bevins-Taylor said there was no personal property and the $25,000 was what she required to cover costs she incurred in January to have the property surveyed and the church building gutted. She said she believed it came to be listed as a separate item from the $700,000 cost of the property because systems officials told her that they were authorized to spend only $700,000 for the property.

A realtor at the realty company told the newspaper the $28,000 commission was 4% of the sales prices, “which is lower than most real estate commissions.” A trustee of the church that sold to Bevins-Taylor, said that the property was listed for sale for at least four years and that the retirement systems could have bought it for much less than $700,000 during that time.

“It’s something our board believes must be looked at, but I don’t think there’s any retiree or stakeholder (who) needs to worry about a benefit not being paid because of this transaction,” Hanes said.