It’s been more than a year since we heard the Chicago Transit Authority Retirement Plan first discuss reforms after we reported on a potential conflict of interest involving a now-former trustee and retirement plan vendors – and so far the pension board still hasn’t made any improvements.
But that may change now that new leadership has arrived, or soon will.
The pension fund’s executive director, John Kallianis, and attorney, Jim O’Connell, both plan to leave in upcoming months. Also, following recent union elections, three new trustees have joined the board, including Ken Franklin who is the new president of Amalgamated Transit Union Local 308, the union that represents CTA rail workers.
Franklin replaces Bob Kelly, the former trustee and Local 308 president who had been soliciting donations from investment managers and other pension fund vendors for the union’s scholarship fund. Kelly’s daughter received one of the scholarships Local 308 awarded in 2012.
Kelly said previously that he didn’t do anything wrong. He did not return recent messages.
But his actions raised concerns not only about possible conflicts of interest but also about whether the pension fund should maintain tighter controls through its own policies and procedures.
The fund’s governance, in fact, has been the subject of numerous Better Government Association reports.
They started in 2013 when we learned the retirement plan’s now-former investment consultant was under investigation by the U.S. Securities and Exchange Commission for a questionable business deal with another client, a public-sector pension plan in Atlanta.
Soon after we discovered the CTA fund didn’t maintain budget or payroll records, and we had to sue the agency in order to get other documents we requested under the Illinois Freedom of Information Act, the state law that guarantees public access to certain government records.
Once those records were released, we learned that the CTA’s retirement fund and health care trust spent nearly $60,000 since 2010 to send officials to conferences in destinations such as Honolulu, San Diego and Las Vegas.
That’s all on top of the policy concerns that were raised after the story came to light about Kelly taking charitable donations from the fund’s investment advisers.
At a public board meeting following that report, trustees briefly discussed how to handle the situation going forward, with one board member suggesting that the fund ask vendors for reports on their charitable work.
In the end, the board didn’t take any action and instead asked the fund’s attorney to do some research and then give them policy recommendations.
Recently, O’Connell said his agency has had discussions but no decisions have been made. Although he said he couldn’t disclose what his recommendations are because of attorney-client privilege, he did think there might be movement on reforms soon after the new board settles.
“You have to vet it legally, have enough conversations among the trustees to make sure they are comfortable, and with new guys jumping in, it definitely slows it all down,” O’Connell said of the delay. “Once we have a stable board, which I think we are hopeful we have at this point, . . . we’ll be in a good position.”
O’Connell, however, plans to leave the job in April for a new retirement fund position with the United Methodist Church.
Kallianis, who expects to be gone in June, said his decision to leave had nothing to do with any of the recent controversies involving the pension plan. He told the BGA he’s not sure where he will end up but is looking for “something totally different.”
“After 25 years in the public sector, including 15+ years as the Executive Director of the Retirement Plan/RHCT, I am pursuing some opportunities in the private sector,” he added via email.
When asked if any policy changes would be in place before he leaves, Kallianis said, “I would certainly hope so. But it’s really up to the board.”
As for Kelly’s replacement, Franklin said he wasn’t going to repeat the fundraising methods of his predecessor.
“I wouldn’t be doing any of that stuff,” he said. “I’m just going to follow the guidelines that are put in place for the trustees.”
For the amount of turmoil this agency has faced in the last year and a half, we certainly hope there will be better guidelines soon – plus improvements that go even beyond policy updates.
This blog post was written and reported by the Better Government Association’s Katie Drews, who can be reached at firstname.lastname@example.org or (312) 821-9027.
Previous BGA stories on the CTA pension fund:
CTA Pension Fund Well-Suited For Scrutiny
Oct. 23, 2014
April 28, 2014
CTA Pension Fund Gives Us More To Rail About
Jan. 19, 2014
CTA Union Hits Up Pension Advisers
Jan. 13, 2014
Dec. 23, 2013
Pensions, Politics and Peccadilloes
Dec. 8, 2013
More Dredging On Pension Adviser
Nov. 25, 2013
Nov. 18, 2013
Nov. 11, 2013
Image courtesy of Flickr user Paul, “Doors Closing” December 21, 2013.