Bloomberg News

North Carolina Union Calls for Probe of Pension Fees

March 18, 2014

An investigator for North Carolina’s public employees’ union asked the state auditor to look into what it called hundreds of millions of dollars of undisclosed fees paid by the government’s pension.

The union said Treasurer Janet Cowell is failing to disclose “all direct and indirect placement fees, asset fees, performance fees and any other management fees” in the $86 billion fund, according to a letter that Benchmark Financial Services, Inc., sent to Auditor Beth Wood on March 17. The fees total about $1 billion, said Edward Siedle, a former U.S. Securities and Exchange Commission attorney and president of Benchmark of Ocean Ridge, Florida. The firm says it specializes in forensic investigations of the money-management industry.

Extra fees on investments could cut the return to the pension and lower the amount available to pay retirees, according to the union.

Cowell disputes Benchmark’s findings, said Schorr Johnson, a spokesman, in an e-mail. The treasurer “reported to the General Assembly all the fee information that must be provided,” Johnson said.

The treasurer “is committed to transparency and discloses all external fees as required by state law,” he said.

State workers send 6 percent of their salaries to the fund. The state’s contributions vary, according to financial reports.

Wood is reviewing Siedle’s request, Bill Holmes, her spokesman, said in an e-mail.

Fees have risen about 400 percent in 10 years, Ardis Watkins, legislative affairs director for the State Employees Association of North Carolina, said in a telephone interview.

“When fees are increasing as fast as ours are, and the value of the fund isn’t going up as fast, then we have a problem,” she said. “It’s become clear to us that performance of the pension is where the problem is.”

To contact the reporter on this story: Darrell Preston in Dallas at dpreston@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Jeffrey Taylor, Pete Young


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