With Pension Fund, Florida Chooses Not to Invest in Transparency

Ash Williams was reappointed as executive director of the State Board of Administration, which oversees Florida's $120 billion pension fund. (Photo courtesy of State Board of Administration.)

By Ralph De La Cruz
Florida Center for Investigative Reporting

Ash Williams, the man who runs Florida’s pension fund, was unanimously reaffirmed to that post Wednesday.

That might prompt the question: What do you have to do not to be reappointed as executive director of the State Board of Administration, which oversees the $120 billion pension fund, the fourth-largest in the country? Be transparent, cooperative and above-board?

Because Williams has displayed none of those qualities during his three years as head of the SBA.

Let’s review:

Last summer, the former hedge fund manager was questioned about his investment in funds operated by former clients and partners. The St. Petersburg Times ran a story showing that the state would have done better if it had used a quick and easy automated index rather than the hundreds of high-priced Wall Street experts.

The incident revealed a troubling lack of transparencyby the public agency about its investment operations. It was so troubling that Gov. Rick Scott asked Williams about it in an August cabinet meeting. Williams answered: “I think the transparency issue got a great airing the last legislative session. We have for the most part full transparency.”

That response subsequently earned a “false” ranking by Politifact Florida, the fact-checking website operated by the Times and The Miami Herald. Turns out that the issue received all of 36 minutes of discussion throughout the entire legislative session. And most of that time it was a back-and-forth between Williams and Sen. Mike Fasano, who at one point showed an SBA document that had been so heavily redacted that it was useless.

“It’s all blank, Mr. Chairman,” Fasano said during a hearing. “There’s nothing. It just goes on and on.”

Fasano subsequently asked for documents concerning the state’s $125 million investment in Starboard Value and Opportunity, a company spun off of Ramius LLC. Ramius was run by Thomas Strauss, one of Williams’ former clients.

Strauss and Williams had a cozy enough relationship. Weeks after Williams took over the SBA, Strauss approached him with first-name familiarity.  ”Ash,” Strauss e-mailed Williams, “I hope you’ll consider Ramius.”

According to the Times, Williams wrote back two months later “that he had approved documents to keep confidential the SBA’s review of a possible investment with Ramius.”

So it’s understandable why Fasano might have an interest in the particulars of that transaction. Williams answered the senior senator’s request for the records with a bill for almost $11,000.

After public and legislative outcry, Williams backed off from the $11,000 bill. But as of this week, Fasano was still complaining that he has not received all of the necessary records.

The incident with Fasano led the state’s Chief Financial Officer, Jeff Atwater, to insist that Williams appoint an inspector general. Williams resisted.

“I have repeatedly asked you to fill this position over the past few months, as have members of my staff, and I am frustrated by the lack of response,” Atwater wrote to Williams.

And yet, Williams has managed to retain the support of Scott, who along with CFO Atwater and Atty. Gen. Pam Bondi make up the three-person board that provides the only real oversight to SBA’s management of what was once a $200 billion portfolio.

The embattled governor who took office with a damn-the-criticism-I’m-the-CEO attitude apparently relates to Williams’ woes.

“It’s frustrating when you get asked questions all the time,” Scott said in November.

And now Williams has been unanimously approved — including a yes vote from Atwater, of all people. And by Bondi, who has had her own issues with Wall Street (she’s currently suing the Bank of New York Mellon for grossly overcharging the Florida Retirement System Trust Fund on transactions).

So why would those three endorse a public employee who has proven uncooperative and recalcitrant, and whose investment decisions have resulted in $8 billion worth of losses since June?

You might find the answer in this 2009 profile of Williams in Institutional Investor magazine.

Williams was director of the SBA during the glory days of the pension fund in the 1990s, and then was brought in after the SBA’s risky policies almost bankrupted local government pension funds during the real estate collapse in 2007. That near-emergency prompted the former executive director, Coleman Stipanovitch, to resign abruptly.

Williams shepherded the SBA through the crisis, which is probably why state leaders are now reluctant to get rid of Williams despite his sometimes open defiance.

“If you think about his job, his job is to get the best returns we can without taking more risk than he should. That’s not easy,” Scott said in November. “So today I think he’s doing that.”

But you’d think that Scott, of all people, has learned that government cannot be run like a business. And recent history has taught us that Wall Street wizards sometimes come with baggage — primarily a lack of openness coupled with a willingness to push rules in the name of head-turning results.

Those characteristics might be coveted on Wall Street, but they are not conducive to governing and to conducting the people’s business.

The Institutional Investor article (which can be accessed here if you don’t want to subscribe) reports that after the fund fell apart in 2007, the state hired two outside consultants to perform due diligence.

“One of them, Miami attorney Thomas Tew,” the article reports, “says problems were immediately apparent: a lack of Securities and Exchange Commission regulation and oversight as well as the SBA’s dependence on three elected officials — who spend 15 minutes twice a month at the end of the state’s bimonthly cabinet meetings overseeing the agency’s business.”

Tews told reporter Frances Denmark: “If you don’t have auditors and you don’t have regulators, what have you got?“

Tanya Beder, Tews’ due diligence partner, added: “They are in the Dark Ages of risk management.”

But, as the article also pointed out, that lack of oversight is what makes the state job palatable to a big-dollar Wall Streeter. After all, it only pays $325,000 a year.

So Williams not only gets reappointed, but he wants to double the amount of money he can invest without any real oversight.

 

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