Oklahoma Attorney General Scott Pruitt said he was launching an investigation of banks and investment businesses, following up on communications he has received about possible wrongdoing that could have lowered investment returns to state pension funds. He also told reporters at the state Capitol the probe would follow a path similar to that taken by officials in California, Virginia and Florida to “recoup” some $200 million in earned assets.
The Republican attorney general joined two key GOP legislators – House Speaker Kris Steele of Shawnee and Randy McDaniel of Oklahoma City – at a press conference where they announced intentions to conduct public hearings on further state pension reforms in October and November.
Commending Steele and McDaniel, Pruitt also said he supported efforts by Governor Mary Fallin and Senate President Pro Temp Brian Bingman of Sapulpa to protect the integrity of Oklahoma government pension systems and keep promises to government workers.
In a prepared statement, Pruitt said, “An often overlooked area in pension reform is how funds are maintained by banks and what we can do to ensure investments are handled appropriately. I have launched an investigation to review management of these funds, and if there is any occurrence of fraud, I will take the necessary enforcement steps to recover potential losses of tens of millions of dollars.”
Pruitt has sent letters to “custodial banks” which, his staff said, seek “data on investment transactions, including those involving foreign currency exchanges, on behalf of pensions for state employees, teachers, police officers and firefighters.” Responses may help him determine “whether we need to pursue litigation against fraudulent and deceptive practices.”
Pruitt told CapitolBeatOK the currency transactions on overseas investments returning to U.S. pension funds have been a concern, hence his focus on that issue. In response to a suggestion that China might be involved, Pruitt smiled and said, “They’re focusing on China more in Washington than we are.”
Oklahoma’s government pension systems control assets of around $21.4 billion. Rep. McDaniel, who chairs the House Oversight Commission on Pensions, is guiding four interim studies of further pension reforms or management improvements. In response to a question at Thursday’s press conference, he reflected, “We have to keep the promises we’ve made. There’s never been a better time to have a serious discussion about pension reform than right now.”
McDaniel said the summer, fall, and winter, in preparation for another regular legislative session beginning next February, “is the time to listen, and work with others.” Responding to a question from CapitolBeatOK about reforms that addressed 25 to perhaps 40 percent of the state’s unfunded pension liabilities, McDaniel was reluctant to boast too much. However, he said, depending on how reform efforts in a couple of other states play out, “We’ve probably achieved more than any other state” in the past 12 months.
He declined, in response to another question from CapitolBeatOK, to criticize state pension plan managers for their “discount rate” assumptions – essentially projected or anticipated rates of return on investment portfolios, which some analysts worry may be too optimistic at 8 percent a year. McDanel said that for the most part, other than the devastating dip in 2008 performance, most of the state’s systems have been reaching those thresholds.
In his prepared remarks, McDaniel said, “Investment performance has a significant financial impact on the fiscal health of pension systems.
Through my interim study, we will look at everything from pension investment policies and procedures to the performance of our outside money managers. With billions of public dollars in assets at stake, it makes good financial sense to take a serious look at these investments.”
Steele told reporters, “Pension reform continues to be a priority in the House because fiscally unstable pension systems can cause fiscal havoc across state government, which risks funding for core services. Putting Wall Street on notice is a big time statement that we take seriously our roles as stewards of the public’s money.”
Concerning the new set of envisioned reforms and Pruitt’s announcement, Steele said, “This bold effort also shows Oklahoma’s commitment to providing its valued state employees with the stable, fully-funded pension plans they have been promised. I commend Attorney General Pruitt and Rep. McDaniel for their commitment to this critical cause.”
Speaker Steele was author of House Bill 2132, which some observers say was the most significant legislative achievement of the 2011 session. McDaniel recently spoke at the Southern Legislative Conference in Memphis, where he surveyed the scope and effect of the reforms enacted last spring.
Capitol’s Editor Note: Questions in reference to the Attorney General’s Pension probe may be viewed on video at www.Capitolbeatok.com