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March 09, 1998 12:00 AM

COUNTY FUND'S POLICY CRACKS DOWN ON PERKS

Susan Barreto
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    ATLANTA -- Money managers and other vendors should know better than to offer Fulton County Employees' Retirement System board member Emma I. Darnell any perks.

    Under the direction of Ms. Darnell and two other board members, the $739 million fund recently drafted and adopted a comprehensive ethics policy that will affect board members, investment managers and consultants alike.

    "I have always believed one of the problems is that there is too cozy of a relationship between government and big business," Ms. Darnell said, describing her motivation for working on the policy.

    Trustees for the pension fund will be keeping a close watch over each other and vendors to ensure conflicts of interests, campaign contributions and influential gifts are eliminated.

    Under the new policy: "No board member shall by his or her conduct give reasonable basis for the impression that any person improperly can influence him or her or unduly enjoy his or her favor in the performance of official acts or actions, or that he or she is affected unduly by the kinship, rank, position of or association with any person."

    Violations would include a trustee taking part in board actions in which there were undeclared conflicts of interests, and vendors or potential vendors failing to disclose solicitations, contributions or gifts to board members. Vendors include: actuaries, attorneys, auditors, brokerage firms, consultants, custodial banks, insurance brokers and money managers.

    Board members are allowed to accept gifts totaling $50 or less annually, or gifts that can be consumed within a 24-hour period from existing vendors or vendors seeking to do business with the fund. Ms. Darnell said she pushed, unsuccessfully, to eliminate the acceptance of all gifts.

    Ms. Darnell also pushed -- this time, successfully -- to amend the plan to include a ban on campaign contributions.

    Ms. Darnell and Nancy A. Boxill, both of whom are county commissioners, are the only board members for whom the campaign contribution ban would apply.

    "My observation has been that's the way you do business, but I just feel that's not appropriate for a pension board," Ms. Darnell said of vendor gifts.

    She added that while campaign contributions are acceptable on the county board, the way the county board of commissioners does business and the way the pension board conducts itself should be different because fiduciary status is "another level of ethical responsibility."

    According to the policy, violations are punishable in varying degrees, depending on the seriousness of the offense. Disciplinary actions against board officials include a warning or oral reprimand, motion of censure, replacement as an officer of the board, referral to the appointing authority for further action, and referral for prosecution.

    For money managers and consultants, the contract with the fund would be voided and the vendor would be barred from future contracts for two years.

    The determination as to whether wrongdoing has taken place will be made by the board after an investigation and a vote by the 11-member board.

    The approval of this strict ethics policy comes on the heels of implementation of a similar gift policy by the $128 billion California Public Employees' Retirement System, Sacramento (Pensions & Investments, Feb. 23).

    The CalPERS board, which faces potential state legislative hearings concerning political contributions and gifts from money managers, has banned political contributions to board members and senior staff members and some fund consultants. Another recently adopted policy requires public disclosure of all gifts to those groups.

    According to Eric P. Bertonazzi, managing director and senior consultant at H.C. Wainwright, Boston, some sort of cap on contributions and gifts is not uncommon. Many of the plans he works with, mainly in Massachusetts, don't allow trustees to accept gifts of more than $50.

    Ethics policies are a hot topic among compliance managers, Mr. Bertonazzi said. "We've heard various news accounts about this, which helps to bring the subject to the forefront."

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