Updated
South Carolina State Inspector General, Patrick J. Maley found “no criminal conduct or wrongdoing” by the South Carolina Retirement System Investment Commission, Columbia, according to a report by Mr. Maley's office.
The report detailed results of the IG's investigation of complaints made by Curtis M. Loftis Jr., the state treasurer, which raised questions about potential malfeasance on the part of the investment commission.
Mr. Loftis, who is a member of the commission that oversees investment of the $27.3 billion South Carolina Retirement Systems, Columbia, filed a complaint with Mr. Maley's office identifying “red-flag indicators of potential wrongdoing,” according to the report.
The IG's office grouped those indicators into six categories:
- misstatement of management fees in audited financial statements;
- false representation of investment valuations in audited financial statements;
- inappropriate employee travel or perks paid for by external money managers;
- inadequate controls for alternative investment fees;
- flawed investment contract approval; and
- restriction of information provided to the state treasurer.
Mr. Maley found that only the last point “had merit,” according to the report, and recommended that the investment commission “provide complete access to all RSIC records, to include confidential information” to Mr. Loftis and his staff, dependent on non-disclosure agreements.
The RSIC is close to doing just that, said Darry Oliver, chief operating officer, in an e-mailed response to a request for comment.
Mr. Oliver said that with the assistance of the South Carolina Budget and Control Board, the RSIC has developed “a workable solution that we plan to present to the treasurer's office shortly.” The new system will allow the RSIC to provide information about investments to Mr. Loftis and his employees, under strict confidentiality terms, where required.
Mr. Loftis, in a news release, said he is “pleased that my effort to bring transparency and accountability to the pension fund over the last two years is yielding results. This report should correct any misplaced notion that the investment commission has about withholding information from a fiduciary.”
RSIC staff and commissioners and the treasurer still have to re-establish “trust” and iron out their differences, Mr. Maley said in the report, stressing the Budget and Control Board should ensure that this happens though “direct intervention.”
Rebecca Griggs, a spokeswoman for the Budget and Control Board in Columbia, did not immediately respond to a request for comment on the options the board might take.
The six “red flags” Mr. Loftis presented to the IG “were just symptoms” of “communication and relationship dysfunction issues (that) are increasingly overshadowing the substantive issues of investment strategy and infrastructure,” according to the report.
“The rhetoric, unhealthy criticism, fault-finding tendencies and a pattern of personal slights must end and the parties need to solve problems, big and small, while face-to-face in the same room and not through e-mail or the media,” the report continued.
The investment commission “expected to be exonerated of any wrongdoing and we were,” Mr. Oliver said in his e-mail.
But Mr. Oliver acknowledged “the relationship between the treasurer and his staff, other commissioners and our staff has to be improved. This is entirely consistent with what other commissioners have known and worked on unsuccessfully over many months … we all are committed to accomplishing this.”
Said Mr. Loftis, in an e-mailed response to a request for comment: “Prudence dictates a harmonious relationship in any endeavor.
“As the IG states, 'the genesis of this dysfunctional communication likely has its origins in RSIC's process of disseminating information.' If we solve the communication problem, these difficult conditions fade away. There can be no room for hurt feelings or grudges as they are counterproductive to our work,” Mr. Loftis added.
The inspector general's report can be read here.
