A pension fund consultant with US political ties who was terminated in the US for apparent conflicts of interest is now consulting for the Public Funds Investment Committee (PFIC) of the Government of Bermuda.

However the Bermuda Government has stood by the firm, stating that during the selection process routine background information on all six firms vetted for the job was done. “The information obtained did not indicate any issues regarding the competence, credibility and integrity of Fiduciary Investment Services (FIS).”

The PFIC is responsible for the Public Service Superannuation Fund and the Contributory Pensions Fund. FIS Funds Management, headed by CEO Tina Poitevien, is a small Philadelphia firm whose fairly impressive list of clients includes the city of Los Angeles as well as the Philadelphia pension board.

In 2000 the firm was hired as an investment consultant for the PFIC. According to questions tabled in the House of Assembly, in March, 2001 it conducted an asset liability study. “At that time,” Finance Minister Paula Cox wrote in answer to questions from Shadow Finance Minister Grant Gibbons, “an investment policy was determined that best met the financial objectives of the Government's pension funds.

“The existing portfolio structure had greater variability of returns, therefore more risk, for both a one-year and a ten-year horizon than the restructured portfolios.”

FIS recommended diversified the PFIC portfolio from 11 to 18 money managers at the same cost, while streamlining other operations to increase efficiency and cut down on costs. The PFIC followed suit and the response from Government has been positive.

However questions have been raised about pension consultants in the US, sparking a Securities and Exchange Commission (SEC) investigation into questions of pay-for-play and just how aware pension funds are of where their consultants may be receiving money from.

FIS was investigated by the SEC in 2003 after questions were raised about their consulting to the pension fund of Nashville, Tennessee.

“We had hired them to manage a hedge fund,” City of Nashville finance director David Manning told The Royal Gazette last week.

“As we got into it,” Mr. Manning, who is also on Nashville's pension board and is the chairperson of the investment committee, said, “we found that some issues with respect to the way it was structured didn't appear as they were represented.”

After several issues were raised, including the appearance of a conflict of interest, the company was terminated. The conflict of interest arose when a consultant working for the Nashville pension board then joined FIS - a consultant named Orim Graves, who now has primary responsibility for the Bermuda funds.

The Nashville fund never lost money while FIS consulted for it, Mr. Manning said. “Truthfully, it performed pretty well.”

The termination was extensively covered in 2003 in an article in Pensions and Investments. However when the article was cited to Mr. White, he said Ms Poitevien told him the article had been retracted because information in it was incorrect.

“They never even asked us to retract it,” Pensions and Investments editorial page editor and author of the article Barry Burr told The Royal Gazette last week.

Mr. Burr, who coincidentally worked as a reporter for The Royal Gazette in the late 70s, said the company did submit a letter to the editor regarding the article, which did run.

In the letter to the editor, which ran some two weeks after the original article, Ms Poitevien wrote: “The article incorrectly states that FIS Funds Management Inc. was terminated ... In fact, it was FIS Alternative Investment Strategies, a legally separate company, which was terminated.

“FIS-AIS is the general partner of the Lynx Fund LP, a hedge fund of funds.”

According to the SEC's Web site, www.sec.gov, FIS Alternative is managed by people who manage FIS Funds Management.

FIS Funds Management filing with the Securities and Exchange Commission lists “The Lynx Fund, L.P., of which FIS-AIS is the general partner.”

When contacted by The Royal Gazette, Ms Poitevien said her firm was “very proud” of its performance in Nashville.

The wonderful thing about the pension fund industry, she added, is that “the numbers speak for themselves”.

She disputed the question of a conflict of interest, saying Mr. Graves was hired some two years after her firm was hired by Nashville - and after a senior consultant at FIS had left the firm, and a routine hiring process involving ads in newspapers and so on was followed.

She also disputed concerns about her firm's disclosure of partnership related expenses in Nashville, saying - as she did in her letter to the editor in Pensions and Investments - that the firm was given just 15 minutes to make a presentation which could not be expected to reach the level of detail that such disclosures would entail.

No other firms involved in Nashville disclosed partnership related expenses, she added.

Pensions fraud expert Edward Siedle was the SEC investigator in the Nashville case.

Now the president of the Center for Investment Management at Benchmark Financial Services in Ocean Ridge, Florida, he continues to investigate wrong-doing on behalf of pension funds.

“The SEC is currently involved in an investigation of conflicts of interest and questionable activity involving the nation's pension consultants,” he told The Royal Gazette after discussing the Nashville case.

“As a result of the revelations of wrong-doing which gave rise to the SEC investigation, it is incumbent upon all pensions to thoroughly investigate the consultants they utilise.

“Of course, any pensions consultant that has any controversy in their past should be especially scrutinised.”

SEC investigator Lori Richards, the investigator heading up the SEC review of the pension fund industry, declined to comment on any individual companies or on any results of the review so far.

She did tell The Royal Gazette that one important question being asked by the review had to do with pension fund consultants.

The review questioned the level of awareness of pension funds. “Do these clients really understand that (consultants) understand that (consultants) may be getting money from money managers as well?”

Articles raising eyebrows about FIS also appeared in Philadelphia newspapers when the firm was hired as the main consultant to the Philadelphia pensions board in 2003. Ms Poitevien served as the chief investment officer at the Philadelphia pension fund from 1990-1994.

The small minority firm of 14 employees replaced Mercer Investment Consulting, a New York-based subsidiary of Marsh & McLennan.

The Philadelphia Inquirer reported in December, 2003 that the fund was not the top choice of pension fund staff, who thought three other firms were more qualified.

Ms Poitevien had donated some $6,000 to the Philadelphia mayor's election campaign in the two previous years, a fact which she did not disclose, according to pension fund officials. She told the Inquirer there was no connection, noting she beat out other firms who gave more.

Mr. White said several weeks ago that Ms Poitevien told him that the Inquirer articles, also, were due to be retracted.

Not so, Inquirer deputy managing editor Tom McNamara told The Royal Gazette via e-mail. “To cut to the chase: no Inquirer article related to FIS has been retracted. No Inquirer article related to FIS will be retracted.”

In February, 2004, the Inquirer ran several more articles on the Philadelphia pension fund and an FBI investigation into allegations that millions of dollars in investments were given to politically wired firms - several which were hired even after a history of poor performance.

At least one of those firms - Columbia Partners - is now receiving money from the Bermuda PFIC, despite being fired from the Philadelphia fund in 2002 when it lost $4.5 million of that fund's money in just two years.

A principal in the company, Thaddeus Fletcher, was a close associate of the political figure involved. Mr. Fletcher left Columbia in 2002 to join another money manager, Cooke & Bieler. In 2002 Cooke & Bieler also joined the list of companies managing money for the Bermuda PFIC.

FIS, MS Poitevien told The Royal Gazette, was not yet consulting for the Philadelphia firm when Columbia came on board. “We had nothing to do with Columbia Partners' tenure.”

As for why they were recommended for the Bermuda PFIC, she noted that money managing firms have multiple products. “They could have a stellar large-cap product, and a very poor small-cap product.” Recommendations are given based on the performance of the product, not necessarily the firm, she said. Columbia is listed as managing small-cap equities for the PFIC, while Cooke & Bieler are listed as managing large-cap equities.

FIS did recommend Cooke & Bieler, Ms Poitevien said, though FIS has nothing to do with the Philadelphia political fundraiser involved in the FBI investigation. “An initial manager we recommended disappointed, so we recommended their termination and the board did so. We then recommended Cooke & Bieler, they were hired, and they are doing smashingly.”

If FIS finds a firm is or was involved in something illegal, she said, “we immediately recommend termination, even if they are performing well”.

While FIS is also consulting for the Hotel Pension Fund, Ms Poitevien said neither the firm nor herself has any other business ties with anyone, members of Government or otherwise, on the Island.