A member of the Kentucky Retirement Systems board of trustees says its executive managers have not been transparent on issues related to a 2006 real-estate deal.
At a special meeting of the KRS investment committee on Tuesday, Chris Tobe tried to present a written complaint on the matter for discussion but was stopped. Tobe is a chartered financial analyst and has more than 20 years of experience in investments. He was appointed to the board of trustees in April 2008.
Vice-chair Bobby Henson said the item was not listed on the official agenda, and because it was a special meeting, the agenda could not be amended.
Tobe said he hopes to put it on the agenda for the next regular board meeting at 9 a.m. on May 5. His written complaint focused on several financial issues related to the 2006 purchase of a former church on Louisville Road by KRS.
According to the Franklin County Property Valuation Administration, the retirement system bought the former Boone Plaza Church of Christ from Caroline Taylor for $700,000 in February 2006. She had bought the property in December 2005 for $450,000.
The church is located at 1300 Louisville Road and has about 8,300 square feet. The PVA said it is currently valued at $700,000.
In 2006, KRS officials told reporters they had filed a fiduciary insurance claim because they experienced a loss on the investment. Tobe claims it was never filed and the lack of action "threatens the financial integrity of the state."
Executive Director Mike Burnside said the claim was filed and has been documented in financial statements.
Tobe said he also wants officials to release a report by legal consultants that places the blame for the real estate investment losses on two KRS executives who have since resigned.
Burnside said the report is protected by attorney-client privilege.
"That is why is has not been released to the public," he said.
Tobe also said managers have concealed the report from him and other board members. Burnside said he never refused to provide information to anyone.
In addition, Tobe said he wants Perimeter Park West, the non-profit real estate holding company owned by KRS, to be dissolved. The company was fined $16,300 by the IRS in 2005 for failing to file a required tax form.
"We should not tolerate any violation of IRS rules by state-affiliated entities," Tobe wrote.
Tobe also said KRS should end its relationship with developer Bill Crumbaugh. In the 1980s, he built the office park that houses KRS and eventually sold the office space to them.
Tobe said Crumbaugh has a conflict of interest because he helped negotiate a commission for his son on the real estate deal for the church property. Crumbaugh denied any involvement in the transaction.
Tobe also said Crumbaugh is employed by Perimeter Park to manage the property based on a no-bid contract.
"I also call for the dissolving of Perimeter Park West," he said.
Crumbaugh said he is not involved with Perimeter Park West and that the contract is renewed periodically.
Burnside said Perimeter Park West has its own liability insurer and offers legal protection to the retirement trust fund. He also said the company, as a 501(c)3 organization, is not required to put contracts out for bid.
He also said the contract to Crumbaugh was negotiated before he was hired.
However, reporters were prohibited from observing the discussions on Tobe's statement although they occurred in open session. Reporters were told the 9 a.m. meeting would go directly into closed session and were kept waiting outside for 40 minutes.
Board member Vince Lang said it was an "inadvertent" error because the board members were not notified reporters were waiting. He said reporters would have access to tapes of the meeting.
"It was a mistake," Lang said. "You should have been included."
Tobe said he also expects to be disciplined for talking to reporters, which is against the board of trustees' by-laws.
"That's also something I'd like to change," he said.
The board of trustees also authorized the sale of the church property and building "B" of the Perimeter Park office plaza for $3.2 million. Chief financial officer Adam Tosh said a contract has not been signed.
"There is an open dialogue," he said.
Building "B" formerly housed the Kentucky Department of Revenue until the relocated last year. The building is currently vacant.
The entire office complex, including buildings A, B and C, is valued at $4 million and has 46,000 square feet, according to the PVA.
The board of trustees also voted to diversify their investment portfolio by investing $25 million in an oil and gas pipeline fund and $50 million in an international portfolio.