The board of the $7.7 billion Arizona Public Safety Personal Retirement System's hired a criminal defense attorney after receiving a federal grand jury subpoena.
The subpoena seeks documents in a criminal investigation into the Phoenix-based pension fund management's relationship with its largest real estate manager, Desert Troon Cos., sources say.
A request by Pensions & Investments to view the subpoena was denied by Michael Sillyman, a partner with Kutak Rock LLP, Scottsdale, the board fiduciary counsel.
Mr. Sillyman, in a March 13 e-mailed response to the request, said, “Grand jury subpoenas are not public records.”
The board voted to approve the hiring of the criminal defense attorney at a special meeting on March 7, according to sources.
At least three former investment staffers at Arizona Public Safety are cooperating with an FBI investigation of the valuation by the pension fund of around $340 million in real estate assets. The assets are part of a joint venture between Desert Troon and PSPRS, according to sources, documents and interviews.
The three former investment officers resigned last year after insisting senior PSPRS management had ignored accepted guidelines for valuing at fair market value the real estate bought before the 2007-2008 market collapse. Instead, the real estate was given a higher value, based on the price at which Desert Troon expected to be able to sell it after a full recovery of the Arizona real estate market.
A review by the Arizona Auditor General's Office last year found the pension plan had overstated real estate values. Based on the review, PSPRS administrators chose to write down the real estate by $24.7 million for the fiscal year ended June 30, 2013.
