A news report in the Bay City Times said that the dispute started in 2002 when money manager Asset Strategies Portfolio Services recommended and the Bay City Police and Fire Retirement System Board of Trustees approved giving Advance System Management a $10 million mandate.
Officials pulled back the investment six months later after suffering the $3 million loss, the news report said. The Retirees Association wants $3 million in damages and to have Asset Strategies removed as the fund’s money manager.
“They used extremely poor judgment,” attorney Kim Higgs, who is representing the retirees association, told the newspaper. “You don’t take these kind of risks with people’s retirement funds.” At the time there was about $50 million in that fund, Higgs said.
In 2003 Attorney General Mike Cox issued an opinion that the investment was illegal under the Public Employee Retirement System Investment Act, which says that no investment may exceed 5% of a fund’s assets.
“They were pushing the envelope. They were getting overly aggressive, in my opinion. Part of investing retirement funds is you’re supposed to be somewhat conservative,” Higgs said. “They were not as cautious as they are statutorily required to be.”
The suit was filed in Bay County Circuit Court. The five-member Board of Trustees is being named in the lawsuit because, according to Higgs, it should have gotten an independent legal opinion before approving the investment. The police and fire pension fund covers about 170 retirees and beneficiaries, and about 150 active employees who pay into the fund.