SALT LAKE CITY - Richard Cherry is out as chief investment officer for the $11.5 billion Utah State Retirement System, following an internal investigation into insider trading and other conflict-of-interest activity, confirmed Robert Newman, executive director.
Wayne Welsh, legislative auditor general, said he didn't know whether Mr. Cherry had been terminated or had resigned. Mr. Newman would only say Mr. Cherry is no longer with the fund. Utah fund board member Clifford D. White said Mr. Cherry resigned.
Mr. Cherry couldn't be reached for comment; his attorney, Francis Wikstrom, said he couldn't comment because he hadn't read a copy of a written agreement between Mr. Cherry and the pension fund.
Mr. Cherry had been on administrative leave since February, following a report by the Legislative Auditor General's Office saying he may have violated state or federal laws by making personal investments based on privileged information. It also alleged he may have influenced fund managers to invest in companies in which he held personal stakes (Pensions & Investments, Feb. 17).
3 investments cited
An internal investigation following the report found three of Mr. Cherry's personal investments "may have been designed to benefit from a (pension fund) transaction." The Salt Lake City law firm of Parr Waddoups Brown Gee & Loveless conducted the investigation.
One investment appears to have violated the pension system's ethics policies, the internal investigation found: Mr. Cherry's purchase of 15 put options in Charles River Laboratories International Inc. on the same day he directed the sale of 195,000 shares of the company by the Utah pension fund. In addition, Mr. Cherry knew of the distribution of 2.5 million shares to other investors, according to the internal investigation. Mr. Cherry had obtained this information in a letter from a general partner at Charles River because of his position at the fund, said Mr. Welsh.
Internal investigators were unable to determine if Mr. Cherry's actions violated state or federal securities laws. The Utah Division of Securities and the Securities and Exchange Commission are still conducting investigations, said Tony Taggart, director of the Utah Division of Securities, Salt Lake City.
No monetary harm
According to the law firm's investigation, none of Mr. Cherry's personal transactions appears to have hurt the fund monetarily, nor had he taken any action on behalf of the fund that was not in the fund's best interests.
Other fiduciary employees did not display any type of personal investment pattern that would indicate intent to benefit from investment activity by the state pension fund, the internal investigation found.
The internal investigation also did not find "credible evidence" that Mr. Cherry or any other fiduciary employee had influenced fund managers to buy or sell stock in specific companies.
In early April, the Utah Legislative Auditor General's office released a performance audit of the investment practices of the Utah Retirement System. The audit concluded the system has "followed prudent investment practices" for the most part, but could strengthen its asset allocation policy and improve oversight of strategic risk and alternative investments. The audit suggested reviewing and rewriting the investment policy and adopting a set of governance policies.
In response, the system hired Ed Archer to be compliance officer, a new position. Mr. Archer was an internal auditor for the fund. In his new role, he will monitor the personal trades of fiduciary staff and the investment transactions made by fund managers. Mr. Archer will report to Steven West, director of internal audit.
Plan officials will decide by May 2 if they will use a search firm to find a chief investment officer to replace Mr Cherry. Mr. Newman said the search will be nationwide, but further details have not been determined.