Ethics officials earlier this year slapped fund manager Hicks Muse Tate & Furst with a $5,000 fine for showering largesse on officials of the Louisiana Teachers’ Retirement System of Louisiana (TRSL). (The text of the ruling is here .) The finding comes months after former TRSL director Brian Minturn was forced from his post when he raised concerns about the fund’s potential ethical lapses (See Louisiana Teachers Pension Board Sacks Director ).
The ethics probe found that from 1999 through 2001, former director James Hadley attended four meetings hosted by Hicks Muse in Dallas, which continued as meetings and social events at the Hicks Muse hunting camp. Hadley also participated in four other Hicks Muse gatherings in Palm Springs or Sante Fe which included golf outings, the ethics report said. Likewise, from 1999 through 2001, board member William Baker attended five Hicks Muse meetings in Dallas, three of which continued as meetings and social events at the Hicks Muse hunting camp. Further, Baker participated in three other Hicks Muse meetings in Palm Springs which included golf outings, ethics investigators said.
TRSL’s board of trustees fired Minturn last summer, almost six months to the day before the Ethics Board ruling. At the time, TRSL board chairman Jerry Baudin and others said Minturn was simply not a good fit for TRSL (See Fired La. Pension Head: I Wasn’t There to Make Friends ).
“I was fulfilling the obligations of the ethics law to report any potential violations,” Minturn told the Business Report. Minturn now runs a Denver, Colorado money management firm, according to the news report.
Minturn’s concern about potential problems at the fund not only concerned ethical issues, but also the fund’s asset allocation. Early on, Minturn grew alarmed after he discovered that nearly 20% of TRSL’s assets had been invested in a mix of private equities, venture capital, real estate trusts and mezzanine financing. “This was an alarming concern because my top priority was to protect assets,” Minturn told the Business Report. TRSL’s portfolio, he said, was “out of whack.”
Ultimately TRSL’s own audit of its Hicks Muse investments identified at least six problem areas, ranging from a lack of adequate monitoring of private equity investments to the appearance of a conflict of interest by the board’s paid investment expert, Holbein Associates. Holbein, which is based in Dallas, analyzes investment opportunities and advises the TRSL board of trustees on investment decisions.
The Ethics Commission investigation stuck to a relatively narrow focus, Minturn said: TRSL’s dealings with Hicks Muse from 1998 to 2001. Minturn said he believes there were many more questionable gifts and entertainment events. During his time at TRSL from 2002 to 2003, Minturn said it was routine for money managers to entertain staff and board members.
“What I know is the Hicks Muse situation was not an anomaly with Teachers’ Retirement,” Minturn said. “It’s the only one that has been investigated so far.” No other investigations are pending.
Minturn’s successor, TRSL Director Bonita “Bonnie” Brown, has invited Ethics Commission staff to put on seminars for board and staff at TRSL. Also, TRSL crafted new internal policies that, she said, are even stricter than the ethics requirements.