Steven Herbert, former chief investment officer of the Kentucky Public Pension Authority, Frankfort, has filed a whistleblower lawsuit against his former employer, alleging the authority has misappropriated funds and violated public policy by terminating him.
The lawsuit, filed on Dec. 16 in Franklin Circuit Court in Frankfort, alleges the authority wired funds out of its accounts to external accounts without proper accountability, according to the court filing.
The Kentucky Public Pensions Authority oversees about $22 billion in pension fund and insurance plan assets of the Kentucky County Employees' Retirement System, and the Kentucky Retirement Systems, which consists of the Kentucky Employees' Retirement System and Kentucky State Police Retirement System
The filing says Mr. Herbert immediately saw problems with the administration of the pension funds' assets after joining KPPA in January 2021, specifically regarding the holdings of Perimeter Park West, a real estate company responsible for the management of buildings housing KPPA's offices. According to the filing, Mr. Herbert found that Perimeter Park West's financial statements were not supported by appropriate documentation and was told by staff that money was embezzled by commercial real estate company Crumbaugh Properties. That firm had full access to write checks from PPW's bank account and there wasn't proper oversight by KPPA staff, according to the complaint, which alleges that KPPA staff attempted to thwart Mr. Herbert's efforts to address that oversight.
Officials at Crumbaugh Properties could not be immediately reached.
According to the filing, Mr. Herbert then received a letter from KPPA Executive Director David Eager on May 31 terminating him "without cause." The lawsuit seeks an unnamed amount of compensatory damages and costs including attorney fees for reporting illegal conduct and the violation of public policy in his termination.
Steve Willer, KPPA's deputy CIO and interim CIO following Mr. Herbert's termination, officially took the title of CIO on July 16.
A KPPA spokesman said in an emailed statement: "This Complaint, filed by former employee, Steven Herbert, contains demonstrably false allegations. KPPA regrets that it will be forced to spend resources to defend against Mr. Herbert's lawsuit, but we are confident in our defense of the claims he has asserted."
Thomas Clay, attorney at Clay Daniels LLC and Mr. Herbert's attorney, had no specific statement but said he's received feedback from several sources that will support the allegations.