A financial advisory firm facing federal scrutiny after allegedly failing to disclose a conflict of interest to an Atlanta public-sector pension board also works for the retirement funds of two government agencies in Chicago.
Atlanta-based Gray & Co., which is currently under investigation by the U.S. Securities and Exchange Commission, helps manage more than $2 billion in retirement assets as the investment consultant to the Chicago Transit Authority’s pension and retiree-health plans, the Better Government Association reported a week ago.
Now, the BGA has learned that Gray & Co. also serves as a key adviser to the retirement fund of the Metropolitan Water Reclamation District of Greater Chicago, which handles wastewater treatment and flood control for much of the Chicago region.
There, Gray & Co. helps oversee a $1 billion investment portfolio, earning $170,000 a year. According to its contract with the MWRD fund, the firm helps develop investment policies, researches and recommends investment opportunities and fund managers, and monitors performance.
Until recently, Gray & Co. performed similar work for a pension fund in Atlanta, where Larry Gray, the firm’s founder and president, advised the board to invest in a private fund controlled by Gray & Co., allegedly without disclosing the relationship, according to interviews and pension documents.
“He pitched his own firm without telling us that he owned it,” said Alfred Berry, Jr., board chairman of the City of Atlanta General Employees’ Pension Fund.
The conflict of interest wasn’t discovered until after the board voted and approved the deal, Berry said. Another trustee, Angela Green, subsequently filed a complaint with the SEC, a regulatory agency that governs the financial industry.
Gray & Co. has since resigned from the Atlanta fund.
In light of the controversy, the Atlanta Journal-Constitution also found that Larry Gray failed to report to regulators $425,000 worth of tax liens filed against his home in Georgia and a $1 million settlement for a lawsuit that accused him of fraud.
Larry Gray declined to comment when reached by the BGA on the phone. Another Gray & Co. executive declined to speak to the BGA, on advice of “legal counsel.”
However, in a Sept. 24 letter to the MWRD retirement fund, Larry Gray responded to the recent media reports and said he was “outraged” by the “attack on my character.”
“The fact is that in my 33-year career, I have always been forthright, honest and put the interests of my clients first,” he wrote.
Addressing the tax liens, Gray said he entered into an agreement with the Internal Revenue Service in 2005 to resolve outstanding tax payments and has remained in compliance since then. As for the $1 million settlement, he said he “adamantly” denies the claims in the lawsuit and thought it was best to settle “to avoid the distraction of the litigation.”
Gray also disputed the lack of transparency board members alleged during the questionable investment deal in Atlanta.
The letter goes on to say “. . . Gray & Company has worked very hard to establish and maintain a reputation of integrity, transparency and performance. As such, our desire is to be transparent with you as our valued client.”
As of now, Gray & Co. remains the adviser to the MWRD pension fund, which has about 2,300 beneficiaries currently collecting retirement income and about 1,800 active members, who contribute up to 10 percent of their paychecks to the fund, records show.
Unlike in Atlanta, the MWRD fund does not have money invested in Gray-controlled accounts, so fund “assets are not at any risk,” said the executive director of the MWRD pension, Susan Boutin.
Even so, Boutin said her agency “will continue to monitor the situation.”
“The Fund has asked legal counsel to look into the allegations and advise the Trustees . . . as to whether any of the actions are a cause of concern,” Boutin said in an email.
Six out of the seven pension trustees who oversee the pension fund did not return phone calls or emails. The other trustee, Water Reclamation District Commissioner Barbara McGowan, told the BGA Gray spoke at a recent board meeting but said she was not present at that meeting, and directed questions to the fund’s director.

Kathleen Therese Meany, president of the board of commissioners who oversee the district, did not return calls or emails either. And David St. Pierre, the district’s top administrator, noted the pension fund is technically a separate entity and declined to comment until he had more information.
As for the CTA, pension fund officials there insisted no money was at risk and said they, too, would keep watch over the situation.
Seth Lipner, a professor of law at Baruch College’s Zicklin School of Business, stressed that any alleged disclosure problem should be taken seriously.
“Any fiduciaries, like the trustees of a pension plan, who are on notice there is some smoke coming from that pile of leaves have a very high duty to conduct a full investigation immediately and to make the most carefully and cautious decision they can make,” he said.
“Ultimately, the trustees are responsible,” he added.
This story was written and reported by the Better Government Association’s Katie Drews, who can be reached at (312) 821-9027 or kdrews@bettergov.org.