A meeting of the Kentucky Retirement System (KRS) Board of Trustees kicked off Thursday with an a claim by the KRS executive director that the system’s former board chair would be arrested if he participated in the meeting after Gov. Matt Bevin issued an executive order removing him from that position last month.
Board members and attendees of the meeting at KRS headquarters were informed by KRS Executive Director Bill Thielen that members of the governor’s office and the personnel cabinet were in the room, along with Kentucky State Police officers who Thielen claimed had been asked to arrest former KRS Board Chair Tommy Elliott if he participated in the meeting.
Elliott remained in the room during the meeting but not at the table with the board members. Because the board needs someone to preside over the meeting, board member Joseph Hardesty was nominated and served as chair for the meeting.
There was discussion about the board electing a new chair at the Thursday meeting, with Vince Lang being nominated, but those motions were delayed to avoid any more controversy at this point.
KRS is currently without an official board chair after Bevin’s replacement for Elliott, dermatologist Dr. William Smith, turned down the post Tuesday, the same day Attorney General Andy Beshear’s office issued an opinion stating Bevin does not have the authority to remove Elliott and that Dr. Smith did not have the qualifications to serve in the position.
On Wednesday, the governor’s office appointed Mark Lattis of Louisville, a CPA for Yum! Brands, to replace Smith in the appointment process. Lattis was not in attendance at Thursday’s meeting.
In response to the controversy over Elliott’s participation in the meeting, Gov. Bevin’s office released a statement saying Elliott made the choice himself to sit aside Thursday and said the governor feels it’s time to move forward.
“The governor issued a valid executive order removing Mr. Elliott from the KRS board. Mr. Elliott voluntarily elected not to participate in the board meeting this morning. We are ready to move forward and continue the work of fixing our $35 billion unfounded pension crisis,” Bevin Press Secretary Amanda Stamper said in the statement.
Adding to the tension of the meeting, Thielen announced he had submitted written notice Thursday that he is retiring from his position as executive director of the ailing system.
As previously reported on The Bottom Line, Thielen announced his retirement last year but ended up signing a new contract with the system in October with a controversial salary bump and a guarantee of three more years in his position. This came after the board conducted a nationwide search for a replacement, which they said was unsuccessful.
On Thursday, Thielen said he believes it is the right decision for him and for the woefully underfunded pension system to step aside. His contract contains a provision requiring 60 day notice of his resignation and he will officially retire on September 1, 2016.
After the controversy was out of the way in the first 30 minutes of the meeting, the board went about its business on the agenda and introduced their new board members who have been appointed by Bevin to replace members whose terms were up.
David Eager, a partner in Eager, Davis & Holmes, LLC, of Louisville who assists organizations interested in making equity investments and acquisitions in the investment management industry, was appointed to the board by Bevin in April.
John Farris, the Interim Vice President of Investments and Chief Financial Officer at Centre College and Founder and President of Commonwealth Economics and LandFund Partners, was appointed by Bevin earlier this month and sworn in at the meeting Thursday.
The difference between the appointments of the two new board members and the attempt by Bevin to appoint someone to replace Elliott is that Elliott had just been appointed to a new four-year term as board chair by former Gov. Steve Beshear. Farris and Eager were named to the board when the terms of board members Mike Cherry and Daniel L. Bauer had expired.
Moving forward, controversy will continue for the KRS board as long as the tensions between the governor’s office and the board over the position of the chair remain.
Because the next scheduled meeting of the KRS board meeting is set for September 8, Thielen suggested that the board hold a number of special meetings before that time to address many of the controversies before the system including his replacement as executive director since he will retire September 1.
There was also a motion to dissolve a committee that had been used to appoint executive directors and instead use the full board to approve such a contract moving forward.
Ah, yes …. appoint investment management types who will push questionable strategies on the beleaguered KRS system. The board would be well-advised to review the problems facing CalPers, which has persisted in wasting money on M&A schemes and fraudulent fees. Caveat emptor, y’all.