AUSTIN, Texas -- A disagreement over parliamentary procedure has put on hold the fates of two performance-measurement consultants for the $20 billion Texas Permanent School Fund.
While some board members believed they hired Houston-based Everen Securities Inc. as a performance-measurement consultant and terminated Dallas-based Holbein Associates Inc. at a Sept. 10 board meeting, the fund's staff and officials at the Texas Education Agency disagree, claiming the board in fact only agreed to consider such a move this month.
Texas Commissioner of Education Jim Nelson, who oversees the actions of the fund, recently issued a memorandum -- written by the Texas Education Agency legal counsel -- to clear up discrepancies in motions distributed to individual trustees after the meeting.
"At the November 1999 meeting, the Committee and the Board could hear the presentation made by Everen Securities in conformance with the action taken at the September meeting and may authorize the awarding of the full contract for performance measurement and evaluation to Everen Securities, or any of the other proposers," David Anderson, the agency's general counsel, said in the memo.
The disagreement began Sept. 9, the first day of the two-day board meeting, when board members on the finance committee decided to have incumbent Holbein and another candidate, Asset Consulting Group, St. Louis, each prepare reports for the quarter ended Sept. 30 for the finance committee to review at the November board meeting.
After the board approved the finance committee's plan, David Bradley, a trustee and finance committee member, reported his belief that Asset Consulting Group executives had violated a rule barring contact with individual board members during the search process.
Asset Consulting Group Senior Consultant Randy Kirkland denied his firm violated the no-contact rule.
Mr. Bradley soon decided the board should hire Everen Securities instead.
Mr. Bradley made the motion to hire Everen during the Sept. 10 meeting, he said. He believes the ensuing vote to hire Everen was essentially a vote to terminate Holbein.
"Those who refuse to accept (the decision of) a majority of the board have resorted to this tactic," he said, referring to The Texas Education Agency's legal analysis of his motion.
The Texas Education Agency disagrees with Mr. Bradley's interpretation of his motion. The TEA supports the version Chase Untermeyer, board chairman of the school fund, restated later at the Sept. 10 meeting. Mr. Untermeyer's restatement referred to the finance committee's Sept. 9 motion concerning Holbein and Asset Consulting Group and asked the board to substitute Everen Securities, presumably for Asset Consulting, according to meeting minutes and the Texas Education Agency.
Now, the board could wind up starting from scratch.
"It won't be the will of the board to hear (Richard) Holbein (give the performance report). They can pay him. I don't care and I'm not going to listen to him," Mr. Bradley said.
Mr. Holbein's contract expires Dec. 31.
Bob Offut, chairman of the finance committee, agrees with Mr. Bradley. Mr. Holbein is a favorite of the board staff because he praises them in his reports to the board, Mr. Offut said. "The board clearly said that Holbein is clearly not in the picture," he added.
Paul Ballard, acting executive administrator of the school fund, said his staff was not given any direction to terminate Holbein and he expects Holbein will make a presentation to the fund's finance committee in November.
By press time, officials at Holbein did not respond to telephone calls seeking comment.
One of the main reasons Everen's hiring created a stir at the September board meeting was a pending SEC investigation into some of Everen Senior Vice President Russell Stein's dealings while he was with Merrill Lynch Consulting Services in the early 1990s.
All charges against Mr. Stein were dropped 17 days after the fund's September meeting. According to a spokesman for Mr. Stein, "No wrongdoing was found on anyone's part."
Will Davis, a board member who originally voiced concern over Mr. Stein's past, said he felt a little better knowing Mr. Stein had been cleared, but he contends Mr. Stein violated the board's no-contact rule. Mr. Davis said he is worried about what could be construed as a double standard, due to the concerns voiced about Asset Consulting Group's violating the no-contact rule.
The no-contact rule bars consultant or money manager candidates from contacting board members prior to a vote.
Mr. Davis said Mr. Stein was the only consultant in the running he knew had definitely violated the rule.
Mr. Bradley told trustees at the Sept. 10 board meeting that Asset Consulting Group had also violated the no-contact rule, and that Mr. Stein had violated the rule only to provide more information about the SEC allegations to trustees.
While Mr. Davis doesn't intend to vote to hire Everen at the November meeting, he said, eight certain votes to hire the firm are already in place.
"If I were Holbein, I don't know if I would be eager to come," Mr. Davis said.