Few major investment management clients have called for reviews of their relationships with Bankers Trust Co. following the bank pleading guilty to fraud and agreeing to pay a $60 million fine.
The Teamsters Central States, Southeast & Southwest Areas Pension Fund has launched a search for a replacement after Bankers resigned the account, but no client contacted by Pensions & Investments has made any move to drop Bankers. Many clients were generally supportive of continuing their relationship with Bankers Trust, basing their confidence on the bank's action to correct the problem:
* At the Missouri State Employees' Retirement System, Jefferson City, Gary Findlay, executive director, said, "We've had conversation and correspondence with them about the matter."
He said the $4.2 billion fund was satisfied with the action Bankers took. Bankers manages a $350 million EAFE index fund for Missouri.
* At American Express Retirement Services, Minneapolis, Bob Richie, senior vice president of investment services, met with Bankers Trust officials after he read about Bankers Trust's admission of problems with misappropriation of funds, said Barbara Buchman, director of marketing. Bankers Trust subadvises three indexed collective trusts for American Express.
"Bob . . . asked the questions he thought he needed to ask and was satisfied with the answers he got. He was satisfied that the people responsible for the misappropriations were gone and that it was appropriate for Bankers Trust to continue to subadvise funds for us," she said.
* At AMR Investment Services Inc., Fort Worth, Texas, William Quinn, president of the American AAdvantage Fund family, said, "They only manage an S&P 500 fund for us, just a narrow little slice and we have very good controls in place to protect client money. I don't think their problems in the past are affecting what they do now." Bankers Trust is a subadviser for a $300 million Standard & Poor's 500 index mutual fund of AMR.
* At the $6 billion New Mexico Public Employees Retirement Association, Santa Fe, Fred Reynolds, deputy director of investments, said trustees haven't taken any action "at this point, although everyone is talking about it."
Bankers Trust manages domestic equities for the fund and is the domestic and global custodian.
* At BP Amoco Corp., Chicago, Marvin L. Damsma, director-trust investments, said, "We're not changing anything because of this" case with Bankers, which manages index funds for both Amoco's defined benefit and defined contribution plans, totaling about $100 million for each plan.
Mr. Damsma pointed out that the case involves the disbursement and custodial side of Bankers, not the investment management area, where BP Amoco has its relationships.
* At Bristol-Myers Squibb Co., New York, Robert B. Chapman, assistant treasurer, said executives "would deal with them (Bankers Trust) directly and then make a decision." Bankers Trust manages a Standard & Poor's 500 index fund for the $2.5 billion pension fund.
Resigns from Teamsters
Bankers Trust abruptly quit as a named fiduciary of the Central States Teamsters after the fraud investigation. The nearly $19 billion fund, based in Rosemont, Ill., commenced searches for two named fiduciaries, one to replace Bankers Trust and the other for the position held by Morgan Stanley Dean Witter & Co., whose contract is expiring.
The Teamsters fund sent requests for proposals to 21 investment management companies, said Mark F. Angerame, Central States director-financial accounting.
The 21 are: BankAmerica Corp.; Brinson Partners Inc.; Chase Manhattan Corp.; Citigroup Inc.; First Union Corp.; Goldman Sachs & Co.; IDS Life Insurance Co.; Merrill Lynch & Co.; Metropolitan Life Insurance Co.; J.P. Morgan Investment Management Inc.; Morgan Stanley Dean Witter & Co.; Northern Trust Co.; PNC Bank Corp.; Principal Mutual Life; Prudential Insurance Co. of America; Putnam Investments; Scudder Kemper Investments Inc.; State Street Bank & Trust Co.; Teachers Insurance and Annuity Association-College Retirement Equities Fund; Vanguard Group Inc.; and Wells Capital Management.
The fund sent the RFPs to firms that meet its stringent qualification criteria, which include being among the largest 75 domestic investment companies.
Teamsters officials hope to accept bids through April 1, and choose two named fiduciaries in May. Each will oversee 50% of the fund.
29-day role
Morgan Stanley resumed being the sole named fiduciary after Bankers Trust resigned, just 29 days after becoming named fiduciary.
It had received $1 billion of the approximately $2.8 billion it was initially to oversee. Only about a month before Bankers resigned, the fund sought to increase the allocation Bankers would oversee to 50% of the fund instead of the 15% in the original terms.
Since Bankers resigned, the trustee received approval to split the assets 50-50 between two named fiduciaries.
U.S. District Judge James B. Moran approved the new split for the fund, which operates under a court-supervised consent decree, stemming from a corruption settlement almost two decades ago.
William Zuckerman, senior trial attorney, Office of Solicitor, Plan Benefits Security Division, Department of Labor, brought the Bankers' fraud issue to the attention of officials of the Teamsters fund. After meetings with Bankers and Teamsters fund officials, and other involved in the case, it was agreed that, in the best interest of all parties, Bankers Trust would resign.
Retained managers
Mr. Angerame said Bankers Trust had retained money managers Morgan Stanley had been using and basically the same portfolios, with some exceptions. Bankers Trust placed some of the $1 billion it received only days before it resigned into a Russell 3000 index fund with Barclays Global Investors, San Francisco. After Bankers Trust's resignation, Morgan Stanley switched that money to a Russell 1000 index fund with BGI.
A Barclays spokesman said officials with the manager won't comment on the Teamsters account or its index trading.
