Last week the Better Government Association and Crain’s Chicago Business exposed some questionable behavior of a board member who helps govern the $1.7 billion retirement plan of the Chicago Transit Authority.
The BGA/Crain’s found that pension trustee Robert Kelly, who is also president of the labor union that represents CTA rail workers, had solicited charitable donations from investment managers who are doing business with the CTA’s pension fund.
Read more: CTA union president will stop soliciting favors (Chicago Tribune)
The contributions went to the Amalgamated Transit Union Local 308 scholarship fund, which provides education benefits to young people. In 2012, Kelly’s daughter received one of the scholarships.
Kelly addressed the matter at Thursday’s pension fund meeting, strongly defending his actions but also announcing a couple of reforms.
Among them, he said he would no longer ask for donations from anyone who is working – or wants to work – for the pension and retiree healthcare funds. He also said he would pay the amount equal to his daughter’s scholarship back to her college.
“Like many of you, I serve in many roles,” Kelly told the board, reading from a prepared statement.
He said that integrity is important to him, and that he “would never allow the interest of one organization jeopardize the other.”
He also said that 28 people have received scholarships from the union over the last few years and that applicants are ranked based on the quality of their essays “through a totally blind process.”
He insisted that he did nothing wrong, but said he felt the need to respond because the media has insinuated that his conduct was improper.
Javier Perez, another board member, suggested that going forward, the fund could ask vendors to provide a report of all of their donations and other charitable work. (Perez is an officer for the CTA’s other main union, ATU Local 241, which represents bus drivers. He said his group no longer runs its scholarship program, and that he has never solicited pension vendors for charitable donations.)
Ultimately, the CTA pension board asked for its general counsel to review its policies and procedures and to provide trustees with recommendations.
The BGA has been closely monitoring the CTA pension fund ever since it was revealed that its investment consultant, Gray & Co., was the subject of a U.S. Securities and Exchange Commission investigation. The Atlanta-based firm has been accused of not adequately disclosing a conflict of interest to a public pension fund that it advises in Atlanta.
In Chicago, Gray works for both the CTA’s retirement and retiree healthcare plans, as well as the Metropolitan Water Reclamation District’s $1 billion retirement fund.
The MWRD fund is in the process of hiring a new investment consultant, and at Wednesday’s board of trustees meeting, it was announced that 10 firms have responded to the plan’s request for proposals. Gray & Co. was among those to apply.
The CTA funds are also exploring a change in financial advisers; the requests for proposals are due today.
For more on the CTA fund please see:
CTA Union Hits Up Pension Advisers
A Charity Donation Can Be Hinky Too
For more on the MWRD fund please see:
More Dredging On Pension Adviser
Pensions, Politics and Peccadilloes
This blog post was written and reported by the Better Government Association’s Katie Drews, who can be reached at (312) 821-9027 or kdrews@bettergov.org.
