Speech by Edward Siedle at Florida Atlantic University, School of Accounting, “Issues in IT and Compliance” Executive Program
Hello, my name is Edward Siedle and I am here to talk to you about forensic investigations of pensions. This is an emerging field which, I believe, holds opportunities for those of you who may be interested.
Why are we concerned with pension fraud today?
A. Lots of Money; Easy to Steal: It is said that when the infamous bank robber Willie Sutton was asked why he robbed banks, he responded because that’s where the money is. Well, today there is over $5 trillion in U.S. pensions alone. And, based upon my experience I can tell you it’s a lot easier to skim millions out of these pensions than to rob a bank.
I once told a pension client I could steal $10 million from their pension and they’d never know it happened. That was disconcerting for the pension to hear but it is true. In fact, we later discovered the fund had lost multiples of that amount in a scheme involving a corrupt financial adviser.
B. Population Demographics; Mounting Pressure on Pensions: The American population is getting older. The baby boomers are now entering into their retirement years and they are relying upon their pensions to provide for their retirement security. Guess what? Many are discovering that the promises made by their employer corporations will not be honored. Thousands of pensions have been terminated– turned over to the PBGC, a governmental agency charged handling failed pensions and many others are paring back the benefits promised, such as health insurance, etc.
C. Era of Diminished Investment Returns: It is clear to most investment professionals that the substantial stock market returns of the 1980s and 1990s, will not continue. These extraordinary returns may have concealed skimming out of pensions. When pensions are earning 15% a year, 1% skimming may go unnoticed. When pensions are earning 3% a year or negative returns, a 1% skim factor is huge. If wrongdoing involving pensions exists, clearly we as a nation can no longer afford it. And I would argue we never could.
What are some of the major factors contributing to the pension fraud problem we have today?
A. No One’s Full-time Job: In the vast majority of cases, managing or overseeing pensions is no one’s full-time job. This is a huge problem. Even at many major corporations, the person who is responsible for the pension is also the CFO or has other significant corporate duties and only spends 10% of his time on pension matters.
Also, more often than not, even where a pension has a full-time administrator or staff, these individuals have limited authority. The key decision-makers are part-timers.
B. Unskilled Boards: Most pensions Boards are composed of persons lacking pension investment expertise. For example, public pensions with billions in assets have Boards that consist of policemen; school teachers; firefighters; sanitation workers. Virtually no pensions have paid professional trustees with expertise in managing pension portfolios. And I would argue this is exactly what’s needed.
“I don’t know the difference between a stock and a bond,” a member of the Board of a $15 billion pension told me. “I’m a school teacher,” he said.
C. Pension Fraud Is The Perfect Crime: Due to the weaknesses involved in pension oversight, i.e., (1) part-time boards; (b) lacking investment expertise, pension boards that have been victimized are reluctant to investigate and pursue wrongdoing out of concern for exposing their own culpability. They are afraid they’ll look stupid. Therefore, the thief is allowed to take the money and walk, not run, away without fear.
D. Economics or Freakonomics of the money management industry: There are vast sums of money and substantial market forces at work misleading pensions.
Freakonomics, in case you haven’t heard, is the name of a New York Times bestseller by Steve Levitt and Stephen Dubner. The subtitle for the book is “A Rogue Economist Explores the Hidden Side of Everything.”
The fundamental ideas the book pursues are, according to its authors:
1. “Incentives are the cornerstone of modern life. Understanding them—or, often, ferreting them out—is the key to solving just about every riddle, from violent crime to sports cheating to online dating.
2. Conventional wisdom is often wrong. Conventional wisdom is often shoddily formed and devilishly difficult to see through, but it can be done.
3. Dramatic effects often have distant, even subtle, causes. The answer to a given riddle is not always right in front of you.
4. “Experts”—from criminologists to real estate agents—use their informational advantage to serve their own agenda. However, they can be beat at their own game. And in the face of the internet, their informational advantage is shrinking everyday.
5. Knowing what to measure and how to measure it makes a complicated world much less so.”
Much of my career has been spent exploring the hidden side of the money management and pension industries. Some would call it the seamy side of these industries. The conclusions I have reached from years of investigations are remarkably similar to those of the authors of Freakonomics.
In short, it is my belief that:
(1) The money management and pension management industries are neither rational nor moral. There is far more money to be made from giving pensions bad advice than good;
(2) Much of the behavior in these industries is guided by financial incentives experts hide from their clients and pensions do not fully understand;
(3) Expert advice is frequently subject to undisclosed conflicts of interest that result in substantial, quantifiable harm to pensions;
(4) As a result conventional wisdom, the advice pensions and investors hear repeatedly from experts, is frequently corrupt and wrong;
(5) Confusion regarding what to measure and how to measure performance and other important factors distracts attention from mismanagement, fraud and critical reforms;
(6) The causes of underperformance or failure to achieve investment objectives, especially in the pension context, are generally so distant and subtle that they are virtually never fully exposed.
In summary, the problem is that there’s a lot more money to be made from misleading pensions than from prudent guidance and ferreting out wrongdoing.
4. The Legal Standard of Care: The law is quite clear: Firms providing investment services and professional advice to pensions are fiduciaries. Fiduciaries are required to (1) always act in the best interests of their clients; (2) place the best interests of their clients before their own; (3) disclose any conflicts of interest; and (4) disclose all compensation they receive.
Unfortunately, companies seek to maximize profits, not to do what’s necessarily best for their clients, pensions. Companies seek to maximize returns to their shareholders. If they do not, they risk being sued by shareholders. Doing what’s best for pension clients rarely, in the short term, is best for profits. Further, it is human nature for individuals to seek to maximize their personal gains.
The result is that few of the companies that provide critical services to pensions, involving high degrees of trust and confidence, operate in a manner consistent with their fiduciary duty. In brief, “Your trusted financial advisers are not to be trusted.” At least not always.
Given these realities it is imperative that pensions regularly undertake reviews aimed at uncovering wrongdoing.
How often should reviews be undertaken?
I believe that pensions should undertake comprehensive reviews every five years at a minimum, as well as targeted reviews whenever specific concerns arise.
More frequent reviews would result in less need to recover significant misappropriated assets.
Recently I spoke at a pension conference following Frank Abignale, the former con artist whose life was the subject of the film “Catch Me If You Can.” Frank described how he had been able to steal millions from companies that lacked procedures to detect and prevent fraud.
That’s what we’re talking about today:
Establishing systems for pensions to detect and prevent fraud.
What are we looking for in our investigations?
We are looking for (1) conflicts of interest; (2) hidden financial dealings; (3) fraud and other forms of wrongdoing. These are NOT matters reviewed by accounting firms in their audits. In fact, audit firms would be subject to conflicts of interest in accepting such an assignment since they have already opined as to the accuracy of the financial statements.
For reasons that are unclear to me, apparently these are not matters examined in Sarbanes Oxley reviews.
Do conflicts, hidden financial dealings and wrongdoing exist within pensions?
Since 1983 I have been investigating wrongdoing involving money managers. Since 1995 I have been writing about wrongdoing within pensions. Until recently the industry hardly bothered to dispute my accusations. The reputation of the industry was unblemished and allegations of wrongdoing were considered preposterous. Times have changed.
In late 2003 the SEC asked my firm for guidance in investigating the pension consulting industry. This was the SEC’s first foray into the pension world. Pension consultants, as you know, are important advisers to pensions and exert tremendous influence because they recommend the money managers funds hire.
On May 15, 2005 the SEC announced the findings of its staff study of conflicts of interest in pension consulting. The SEC found conflicts pervasive and disclosure abysmal. Soon thereafter the DOL released a checklist of questions pensions should ask of their consultants.
In short, these two agencies, the SEC and DOL, have confirmed the problems are real. Pension conflicts do exist and do put pensions at risk.
Many pension trustees and their legal counsels have said to me in the past: If these problems really exist, why hasn’t the SEC done something? Well, now the SEC and the DOL have confirmed there are real problems.
What’s going on in Washington?
Would you believe the PBGC has taken over 4,000 failed pensions and never once conducted a forensic investigation? It’s true. When the savings and loans failed in the 1980s, the government looked for wrongdoing in connection with the bailout of the industry. For some reason, when S&Ls fail, we look for wrongdoing but when pensions fail, it’s no one’s fault—ever.
When I met with senior staff of the PBGC recently, the head of the PBGC said to me, “What do we care if there are kick-backs as long as performance doesn’t suffer?” My response was “There are no harmless kick-backs and even if there were, the law says the improper payments rightfully belong to the participants, not the corrupt adviser.”
Well, he’s no longer the head of the PBGC and I hope whomever replaces him has the knowledge and wisdom seek solutions to the nation’s pension crisis.
The GAO recently agreed to conduct an investigation into pension conflicts, including why the DOL and PBGC have not scrutinized failed plans and continue to fail to do so. The issue is not going away.
On the national level, as more plans fail, the demand for investigations will grow.
Where are we today?
As Ghandi once said, "First they ignore you, then they laugh at you, then they attack you, then you win."
My assessment of the current status is that the industry isn’t ignoring or laughing at our message anymore, they’re in an attack mode. We’re in an escalating battle where every instance of successfully exposing malfeasance weakens the industry’s illusion of respectability. The public is beginning to realize that there may indeed be blame to assign when pensions falter or fail. Just like Enron or Worldcom, it took a lot of experts, financial, legal and others, to bring about these spectacular collapses.
For the industry it is critical to oppose the move toward forensic investigations, for any reason imaginable. They’ve got to. The industry knows there is a lot of wrongdoing still to be uncovered.
Examples of conflicts of interest, hidden financial dealings, and wrongdoing we’ve uncovered.
Pension consultants: Pay-to-play schemes where the objectivity of the advice the consultant is providing regarding asset allocation, money manager selection and brokerage is corrupted as a result of secret compensation schemes. The best managers are not selected, performance suffers, commissions and money management fees are excessive.
We’ve seen corrupt pension consultants who pensions thought were getting paid a set fee, say $100,000, earn over a million in kick-backs. One consultant was making $8 million a year. That’s why I offered a pension trustee audience 5 years ago to pay them $1 million to be their consultant. I explained to them I was willing to make the million dollar offer because I could reap multiples of that amount in kick-backs from their money managers.
Money managers: Misrepresentations regarding assets under management, performance, investment process, credentials, undisclosed financial relationships with consultants. Hedge funds are especially problematic.
We’ve seen money managers with no assets under management claim to manage billions.
Brokers: Influence peddling due to relationships with Board members; hidden solicitation agreements with money managers; excessive commission costs; soft dollar and directed brokerage arrangements that pose conflicts and are not fully disclosed.
We just completed a “best execution” analysis for a pension which showed the pension was paying ten times the brokerage costs it should have. Wherever you have “captive” brokerage, that is brokerage directed to a single firm, the need for that brokerage firm to be competitive may go out the window. “Best execution” may suffer.
Custodians: Offer artificially low stated custody fees, while they enjoy hidden profits from securities lending, currency exchange and money market fund cash “sweeps.”
Actuaries: Perhaps more than any other parties, actuaries may turn out to be the greatest culprits. Ridiculously high actuarial rates of return, “revenue neutral” DROP plans and other advice reflecting the wishes or dreams of clients, as opposed to financial reality, may result in these firms facing massive lawsuits.
Lawyers: Collusion between lawyers representing pensions and other vendors to the funds. The enormous fees related to class action cases have resulted in many pension lawyers drifting from their areas of expertise (such as benefits/disability) into investment matters. Fees earned by lawyers are not fully disclosed and neither are conflicts.
The High Cost of Wrongdoing.
From our investigations we have observed that corrupt practices can easily cost a pension 10% of its value over time. This is substantial, quantifiable harm. In an environment where market returns are limited and plan sponsor or taxpayer ability to fund pensions is increasingly strained, the cost of this corruption is unacceptable.
If the nation’s public pension funds don’t clean, they’ll end up where the private defined benefit plans are today: on the verge of becoming extinct, with promises to participants broken.
My message to pensions: CLEAN UP or be SHUT DOWN!!
Conclusion
If I am correct, that is, if pensions investing trillions in assets globally eventually (and in the not too distant future) are required to institute procedures to detect and prevent fraud, then there will be tremendous opportunities for courageous individuals with the expertise and determination to enter this field.
Now I may be wrong. It is possible that pensions investing trillions will be permitted to continue indefinitely mismanaging their assets, lacking controls and reneging upon their obligations to participants in these funds. There are certainly powerful business interests, indeed all of Wall Street, would like to see the current state of affairs unchanged.
But information is flowing more freely than ever today and business practices in the money management industry are coming to light faster than ever. So I encourage you to use your energy to improve pension oversight and increase the likelihood that those who depend upon pensions for security in their old age will see the promises made to them honored.
----------------------------- Institutional Investor: Pension Pay-For-Play By Jonathan Keehner 5/11/2006 7:29:43 PM
After taking office in 2001, Chattanooga mayor Bob Corker grew alarmed: the city’s ailing pension fund had been bailed out an average of $2 million annually by taxpayers over the past three years. The former finance commissioner initiated an investigation, but little did he know it would culminate in Chattanooga’s largest ever settlement – paid in March by two investment banks – and possibly change the nature of pension fund consulting forever.
“What shocked me was that once the pension was fully funded, the risk position had not been throttled back,” said Corker, explaining that the equity allocation was above pension guidelines. “That’s when we began to investigate and uncover the conflicts of interest.”
What Corker ultimately alleged was a breach of fiduciary duty. Claiming millions of dollars in damages, Chattanooga officials filed suit against fund advisor William Phillips, UBS Paine Webber and Morgan Stanley Dean Witter. The complaint, filed with the National Association of Securities Dealers in October 2004, alleges Phillips and the banks’ brokerage arms illicitly gained by violating supervisory responsibilities.
Settled a few weeks ago for $6 million, the Chattanooga suit suggested significant conflicts within the murky world of pension fund consulting. Recent litigation hints that Corker, among others, set a precedent for officials across the nation. And with nearly 2,000 consultants registered to advise trillions of pension dollars, these cases could have a major effect on the public pension system.
Insiders familiar with the cases maintain that the prevalence of abuse is symptomatic of loose regulation and lax enforcement. Sources interviewed for this article note a variety of enrichment opportunities for consultants, who can exploit public funds by favoring money managers, brokers and other advisors. Often governed by parochial boards, pensions may be at the mercy of these sophisticated schemes. As benefits are guaranteed by public dollars, the ultimate victims of pension abuse – taxpayers – can be oblivious to the crime.
“One the most fraudulent activities in finance is consultants acting as gatekeepers in the pension fund system,” said the head of a large hedge fund origination banking team, who spoke on the condition of anonymity. “This has been going on for so long that many consultants aren’t even staffed at a level where they could do real analysis or research. The industry has been crippled by this favoritism – but visibility is increasing.”
Edward Siedle, former Securities and Exchange Commission attorney and founder of Benchmark Financial Services, the firm hired for the Chattanooga investigation, argues that these funds don’t just fail because of unforeseeable market forces – “it is corporations that erred in assuming and managing their obligations,” he says. “The big news is that momentum is building.”
Last year, the SEC and the Department of Labor each issued pension fund examinations raising “serious questions” about consultants disclosing conflicts of interest despite fiduciary duties.
Examining 24 consulting firms, the SEC reported that a majority “provided products and services to both pension plan advisory clients and money managers.” In classic pay-to-play schemes, the SEC describes consultants limiting pension access to managers willing to pay exorbitant fees – such as a $70,000 annual charge for proprietary software sold by one consultant.
More than half the firms were also found to have affiliated broker-dealers, allowing advisors to earn from brokerage “commission recapture” programs. As the SEC notes, these relationships raise concerns over best execution practices and incentives for consultants to provide commission-based advice.
Indeed the Chattanooga complaint centered on Phillips’ broker-dealer affiliations, which may have incentivized the equity-heavy allocation. Phillips increased equity exposure eight percent above the authorized 70 percent, according to the Chattanooga complaint. The Chattanooga suit goes on to say that with a commission or “soft-dollar” arrangement in place, this allocation “enabled [UBS Paine Webber and Morgan Stanly] to earn approximately $2 million, or 70 percent of all equity commissions, during their relationship to the Chattanooga pension plan.”
The banks allegedly generated additional commissions by replacing money managers – which encouraged Philips to fire existing ones.
“The degree of manager turnover clearly indicates that the Phillips Group was only interested in generating commissions,” the complaint states, adding that many managers were terminated shortly after hiring.
Admitting no wrongdoing, each of the Chattanooga defendants – UBS Paine Webber, Morgan Stanley, and Phillips – declined to comment on the case - although a Morgan Stanley representative did state: “We take our obligations to our clients seriously and are pleased to have resolved the matter with the Chattanooga pension plan.”
But the settlement is not a first for Phillips or Paine Webber - the firm subsequently acquired by UBS. In March 2000, a Nashville city pension audit concluded that “several of the options are performing poorly” and the Phillips Group and Paine Webber gave advice “with inherent conflicts of interest.” The 100-page report ultimately led to a $10 million settlement between UBS Paine Webber and the city.
Phillips left UBS Paine Webber for Morgan Stanley in 2000 – the year the audit was released - where he remained until last month. Asked about Phillips’ employment despite the outstanding Nashville case, a banker familiar with the situation explained that the regulatory environment has since changed dramatically.
“Some practices existed more in a gray area and could be justified as a cost of doing business,” the banker explained. “Back when Phillips was at UBS this was not viewed as badly.”
The SEC report puts the issue under a microscope and finally legitimizes the problem, Siedle believes. “On the most basic level, the regulatory reports are something that can be shown to the judge and jury. These are complex financial matters and when dealing with supposedly reputable firms, having the SEC report gets the case in the realm of possible or even probable from absurd.”
San Diego city attorney Michael Aguirre utilized the SEC report in an August suit filed against Callan Associates. Alleging “professional negligence” in advising the San Diego City Employees’ Retirement System, the complaint mirrors charges raised by Chattanooga. Among Callan’s alleged negligence is payment for encouraging trades with select brokerages while failing to disclose financial relationships with these firms.
The suit also focuses on a pay-to-play scheme. Of a pool of 339 candidate managers, a total of six were recommended – who had paid “as much as $500,000 to Callan for so-called educational and/or consulting services.” Of those six, four paid an additional $188,000 annually for membership to an organization set up by Callan called the Callan Institute.
James Callahan, a Callan senior v.p. who consulted for the San Diego fund, does not deny the Callan Institute claim. “This is one of the ways we educate our clients,” he said, adding that membership gives managers important market information and does not affect recommendations. That four of the six managers selected by Callan were members was “purely coincidental,” he maintained.
“What we have done to address this is reconfirm who we are and what we do,” he continued. “What we do is right.”
Listed among the coterie of top consultants, alongside Watson Wyatt and Mercer, the San Francisco-based firm holds a prominent seat in the court of pension advisors. “Callan is the only consultant we have ever used,” said Robert Newland, chief investment officer of the $8 billion Indiana State Teachers Retirement Fund. “We have no problems with them but will certainly be keeping an eye on the suit.”
Yet Callan has not escaped scrutiny from other pension systems. Teachers’ Retirement System of Illinois, a $34 billion fund, recently allowed Callan’s contract to expire. TRS spokesperson Eva Goltermann explains that the relationship was severed due to Callan’s “lackluster performance” and “had nothing to do with the San Diego suit.” Goltermann added that new investment advisor R.V. Kuntz has no conflicts of interest – “an item that played a big role in decision by the Board of Directors to choose them as new consultant.”
“In terms of the prevalence of conflicts of interest, we believe it is widespread,” added Goltermann. “Many investment advisors offer multiple lines of business and often there is a failure to disclose relationships with money managers.”
Underperformance, Siedle points out, is more grating in current markets because “if there is any malfeasance it is not so easily hidden – this is not the nineties.”
According to the Employees’ Retirement System of the State of Hawaii’s Comprehensive Annual Reports, while advising that pension system in fiscal 2002 Callan oversaw a $900 million loss of their $8 billion of assets – which followed a $1 billion loss for the fiscal year before.
Hawaii State Auditor Marion Higa found “that [Callan’s] objectivity could be suspect,” stating the consultant’s “financial relationships can include providing consulting services to money managers on strategy and marketing/sales implementation, software and database information on money managers’ performance, and research findings.”
“Our analysis showed that [Hawaii’s] ERS’ total return on investments over the past five years ranked below the bottom 15 percent nationally when compared with other retirement systems,” Higa concluded. “In addition, the handling of an under-performing investment manager was questionable and may have cost [Hawaii’s] ERS as much as $128 million.”
Both the San Diego and Chattanooga complaints allege recommended managers did not meet basic pension standards. The San Diego complaint cites Lincoln Capital Management as having a performance record well below fund requirements. And the Chattanooga case states the track record of Van Wagoner Capital was not only insufficient for the fund but “failed to meet the requirements to be included in PW [Paine Webber] and Morgan Stanley manager searches.”
Neither Lincoln nor Van Wagoner could be reached for comment, although Callan’s Callahan denied responsibility for recommending Lincoln.
While pay-to-play arrangements can affect pension returns, they also affect smaller buysiders that can’t penetrate the system. “As much as this is an issue for pensioners, it’s a huge frustration for buysiders like me who have no ability or inclination to work the system,” said a hedge fund manager who asked to remain anonymous. “Smaller shops like mine that are focused and routinely outperform just don’t have the ability to play their game.
“If the cost of a bad investment scheme is a certain loss, then think of where the pension would be with a superior and not median product,” the manager continues. “The cost to the system is really more likely to double that loss. Essentially funds are missing the opportunity to invest in the best of a class.”
Growing awareness has raised questions on how future abuse may be avoided. In Corker’s case, the problem often seems to begin with the fund itself.
“They were all nice people on the Board,” said Corker of the Chattanooga pension upon his taking office. “But this was a tremendous fiduciary responsibility for private citizens which was just not being professionally handled.” The Board did not return requests for comment.
Goltermann and Siedle speculate that recent litigation will result in further SEC regulation, with Siedle noting the Federal agency could use a boost in the wake of New York State Attorney General Eliot Spitzer’s pursuit of mutual fund scandals.
Baltimore-based Calvert Institute released a March report alleging the city’s flagging Employees’ Retirement System is managed by a “financially unsophisticated amateur” Board. Calls to the Board were not returned.
“I started looking into ERS because of the shortfall in returns,” said Liebmann, “but quickly discovered the San Diego case and realized it was not dissimilar.” Among the similarities, Liebmann noticed that the systems shared several advisors and managers.
Trips to exotic locales like Monte Carlo and Puerto Rico by pension trustees attending seminars were among other concerning discoveries made by Liebmann. Perhaps most remarkable is the 2004 financial disclosure statement of Ernest Glinka, a Board member who passed on the seminars.
“I did not attend any ‘Client Conferences’ such as those sponsored by MDL Capital, Williams Capital, Bank of Ireland or any other manager,” wrote Glinka. “I did not attend any ‘Industry Sponsored Conferences’ such as those put on by Opal, Callan, NAJP, NAIC, etc. I did not request or accept any fees, accommodation, etc. for speaking before any groups. I did not request or accept any meals, entertainment, tickets to sporting events, golf, etc. from any entities doing business with the Employees Retirement System.”
Perishable gifts were distributed to pension staff, Glinka added, and nonperishable items given to charity – excepting a “mini maglite from Attalus Capital which I retained for use on my boat.”
This case may underscore heightened sensitivity toward abuses in the pension system.
“The issue has now been legitimized,” said Siedle. “Not only has the bar for standard of care been raised, but it is a warning to law firms, banks and consultants. Parties giving corrupt advice or putting their own interests first are now on notice.”
-------------------- Delray threatens to fire consultant as probe into pension fund drags on --------------------
By Erika Slife South Florida Sun-Sentinel
May 19, 2006
Delray Beach * Frustrated that an investigation into its retirement funds has lasted more than a year, the city's police and firefighter pension board threatened to drop its longtime consultant, Smith Barney, if it doesn't turn over financial records before next month's board meeting.
An independent investigator is accusing Smith Barney, along with the fund's former bank, Wachovia, of stonewalling his inquiry into whether the companies improperly collected fees from the $104 million fund.
At the board's meeting Wednesday, Edward Siedle said he has yet to receive payment records, monthly statements and performance calculations from either company. Smith Barney financial advisor Ernie Mahler countered that last summer, Smith Barney sent Siedle "five to 10 pounds" worth of documents.
Siedle argues that he and the forensic auditing firm involved in the investigation, Buchbinder Tunick & Company, have not received documents from Smith Barney from March 1996 to July 2002. From what he's examined so far, he said, "It now appears that Smith Barney may have earned undisclosed compensation" from charging fees without telling the client. He added that the practice, known as principal trading, raises "legal issues."
Siedle also said he is waiting to hear back from Wachovia on whether the bank got an undisclosed amount of money from the fund by investing its cash in a high-cost money market account the bank owned.
The board told its attorney to send a letter to Wachovia instructing it to turn over the documents Siedle wants.
Siedle said he got an e-mail from a Smith Barney attorney saying he would have the requested documents by June 5.
The board said it would decide at its next meeting whether to drop the investigation or Smith Barney.
Siedle, a former U.S. Securities and Exchange attorney, first raised questions in a report on Feb. 4, 2005.
"I think the board's view is the residents should be happy that the board is taking the interest and doing the research to see how the vendors we hire and the companies we use are acting in the best interest of the fund as a whole," said William Adams, chairman of the board.
Taxpayers are ultimately responsible for the fund, from which hundreds of public safety officers' retirement payments are drawn.
Asked to comment on the investigation, Smith Barney spokeswoman Katrina Clay said, "We still have a valued relationship with the board."
A Wachovia spokesman declined to comment.
Erika Slife can be reached at eslife@sun-sentinel.com or at561-243-6690.
Setting Standards For The Investment Management Industry
