Dallas Mayor Mike Rawlings has requested that the Texas Ranger Division investigate the $2.1 billion Dallas Police & Fire Pension System for potential criminal offenses.
Texas Rangers is the criminal investigative arm of the Texas Department of Public Safety.
“The past administration of the Dallas Police & Fire Pension System committed a grave breach of trust with our first responders with serious ramifications impacting current and former police and fire personnel and their families, as well as all Dallas taxpayers,” Mr. Rawlings said in a statement Dec. 30. “As I have learned more in recent years and months about how the pension fund reached its current crisis, I have come to believe the conduct in question may rise to the level of criminal offenses.”
The mayor's office declined to provide further information, including specifics on the conduct in question.
Mr. Rawlings' statement adds that he has been “in close cooperation with the FBI on this matter.” An FBI spokeswoman declined to comment. A spokesman for the Department of Public Safety could not immediately be reached for additional information.
Segal Consulting, the pension system's actuary, projected in July that the pension fund would become insolvent in 2030, absent any changes to benefits or contributions. A record $523 million in withdrawals from the pension fund's Deferred Retirement Option Plan since then has moved that date closer to 2027.
The pension fund board voted Dec. 8, to temporarily suspend DROP withdrawals, a few days after Mr. Rawlings filed a lawsuit against the pension fund for making DROP payments while its finances were strained.
Kelly Gottschalk, the pension fund's executive director, said the Texas Ranger Division had not yet reached out to the pension fund, but the fund would cooperate if asked. The FBI has already been investigating matters related to the pension fund for about a year, Ms. Gottschalk wrote in an e-mail.
In a previous interview, Ms. Gottschalk estimated that about a third of the pension plan's underfunding (roughly 36% funded currently) came from its investment decisions, while the remainder came from generous benefits like DROP, an aging population, unrealistic return assumptions and other plan design issues.
For years, the pension fund invested in speculative real estate deals. A failure to obtain regular appraisals concealed the properties' true value, and losses are estimated at $545 million. In 2014, after the magnitude of the losses began to be realized, the pension fund's administrator, Richard Tettamant, resigned at the request of the pension fund board.
In April, the pension fund filed a lawsuit against one of its former real estate managers, CDK Realty Advisors, for allegedly advising the pension fund to enter into high risk and speculative real estate investments, resulting in write-downs and losses of more than $320 million.
CDK filed its own lawsuit against the pension fund in February over $139,479 in alleged unpaid money management fees.