The U.S. Securities and Exchange Commission announced charges of fraud last week against an investment company that, up until last year, had been a longtime financial adviser to two public pension funds in Chicago.

Atlanta-based Gray & Co. and two of its top executives have been accused of violating federal securities law after allegedly providing “unsuitable” investment recommendations between 2012 and 2013 to several Georgia-based public pension funds, according to an order by the SEC, a federal law enforcement agency that oversees the securities industry.

At that time, Gray & Co. had also been working as an investment consultant for the Chicago Transit Authority’s pension and retiree-health plans, as well as the retirement fund of the Metropolitan Water Reclamation District of Greater Chicago, as the Better Government Association previously reported. 

Both agencies dropped the firm in 2014, and the SEC charges (which are considered civil, not criminal, potentially drawing financial penalties, not prison) do not appear to involve any of the company’s prior activities in Chicago, records show.

But as a former investment consultant for the Chicago funds, the firm had been tasked with providing advice on investment decisions, including where to invest and how much money to invest. The CTA funds had about $2 billion in retirement assets at the time and the MWRD fund had about $1 billion.

Between 2012 and 2013, Gray & Co., as well as its founder Laurence Gray and current co-CEO Robert Hubbard IV, recommended that taxpayer money from four public pension plans in Georgia be invested in “a fund of funds” that was controlled by Gray & Co. “despite the fact that they knew, were reckless in not knowing, or should have known” that the investments did not comply with Georgia law, according to the SEC order.

Furthermore, the SEC alleges the firm misrepresented the investments and breached its fiduciary duty to act in the best interests of its clients. The firm made more than $1.7 million in fees from the Georgia funds as a result of the “fraudulent investments,” the order said.

Gray & Co. and its senior officers “put their own interests ahead of their clients,” Walter Jospin, director of the SEC’s Atlanta Regional Office, said in a press release. “Public pension funds and their beneficiaries deserve better from their advisers.”

Terry Weiss, an attorney representing Gray, Hubbard and the firm, told the BGA via email that the SEC’s claims “are without merit.”

The company filed a lawsuit against the SEC earlier this year claiming the agency’s administrative law process is unconstitutional, Weiss said.

The firm will “vigorously defend itself and continue to fight the SEC in federal court as well as in these administrative proceedings,” Weiss said in his email.

Gray’s Goodbye?
Board members with the Metropolitan Water Reclamation District Retirement Fund voted to begin a search for investment consulting services in light of a growing controversy facing their current adviser, Gray & Co.

Pensions, Politics and Peccadilloes
Andy Shaw: Pension fund officials show a “a disturbing lack of transparency” and refuse to discuss the situation involving Gray & Co. with a reporter.

More Dredging On Pension Adviser
Gray & Co. President Larry Gray attends local pension fund meeting, admits he failed to properly notify the MWRD fund about the SEC investigation.

Gray Area
Gray & Co., the main adviser to the Metropolitan Water Reclamation District’s billion-dollar pension fund, is under SEC investigation. Should Chicago taxpayers be worried?

Track Record
A top investment adviser to CTA pension fund is facing troubling accusations, and an SEC probe, for out-of-state business dealings.

Image: By U.S. Government [Public domain], via Wikimedia Commons

This story was written and reported by the Better Government Association’s Katie Drews, who can be reached at (312) 821-9027 or