Audit Recommends Retirement Agency Make Changes

State Auditor Crit Luallen found no evidence of wrongdoing in an audit of the Kentucky Retirement Systems, but the report raises several areas of concern.

The audit primarily focused on the use of placement agents, who act as middlemen to secure investments from entities like the KRS.  Placement agents have been at the center of “pay-to-play” scandals in other states, but Luallen says that does not appear to be the case in the commonwealth.

However, Luallen says placement agent Glen Sergeon of New York had “an unusually close working relationship” with former KRS chief investment officer Adam Tosh, who no longer works for KRS.

“That placement agent received a high percentage of the investment contracts – more than all of the other placement agents combined,” she says.

Findings from the audit have been referred to the Securities and Exchange Commission, which is conducting an informal inquiry into the use of placement agents at KRS.  The audit makes 92 recommendations, which the KRS board has already started implementing.

Responding to the report, Governor Steve Beshear sent the following statement praising the auditor’s work and looking forward to the necessary changes for additional transparency.

From the governor’s office:

Last August, I asked the Auditor of Public Accounts to conduct this audit because of my concerns regarding the management and accountability of the retirement system.  I am pleased that she found that the substantial investments that support city, county, and state employees as well as thousands of retirees are secure.

However, as I suspected, there are improvements which can and should be made to this system.  The auditor’s recommendations to improve transparency and accountability are well-reasoned and should be implemented quickly to assure the hundreds of thousands of Kentuckians who depend on this system that their retirement funds are handled in a wise and ethical manner.

I am encouraged that the new board chair has already agreed with the audit’s findings and has begun implementing many of the audit’s recommendations.

My ultimate objective for the system continues to be the protection and satisfactory growth of the funds for the benefit of hundreds of thousands of current and retired public employees.

By Tony McVeigh

Veteran broadcast journalist Tony McVeigh has been covering Kentucky politics since 1986, reporting for Clear Channel Communications before joining Kentucky Public Radio in 2004. His stories are aired by seven KPR affiliates, whose signals blanket the Commonwealth and parts of surrounding states. McVeigh began his broadcasting career at WRFC in Athens, Georgia, while earning a Bachelor of Arts in Journalism from the University of Georgia. He has extensive anchor/reporter experience, including stints with South Carolina Network and Georgia Radio News Service in Atlanta. In 2007 and 2008, McVeigh was named Best Radio Reporter in the Kentucky Associated Press Awards. He also picked up consecutive AP Awards for Best Political Coverage. McVeigh won four Kentucky AP Awards in 2009, six in 2010 - including Best Political Coverage and Best Hard News Feature - and three in 2011. His coverage of the 2007 Kentucky governor's race topped the Political Reporting category of the Society of Professional Journalists Green Eyeshade Awards of 2008. In 2009, McVeigh placed second in Courts and Law Reporting in the Atlanta-based competition for journalists in 11 Southern states. McVeigh is also the proud recipient of an Individual Liberty Award from the Kentucky Association of Criminal Defense Lawyers. The Brunswick, Georgia, native is a die-hard UGA football fan who enjoys photography, astronomy, live music, hiking Kentucky's Red River Gorge and exploring the state's beautiful back roads. McVeigh and his big, fat, black cat Simon, reside in Frankfort, KY.