Former official at KY pension system says funds embezzled

Kentucky Public Pensions Authority logo

Kentucky Public Pensions Authority logo

Provided by KPPA

Steven Herbert, former chief investment officer of Kentucky’s state pension plan, filed a whistleblower lawsuit against the agency on Friday, alleging he was fired for attracting attention to the embezzlement of millions of dollars. caused

“They hired him to come here and see if he was making the right investments with the pension money, and that’s what he did,” said former CIO attorney Thomas E. Clay. I was.

The $22 billion Kentucky Public Pensions Authority disputes Herbert’s claims before the Franklin Circuit Court.

The lawsuit “contains manifestly false allegations. is confident

Herbert worked for KPPA from January 2021 to May 31 last year. Previously, he was the Chief Operating Officer of Asset Management at Florida-based Augustine.

According to the lawsuit, after Herbert joined KPPA, he immediately became concerned about Perimeter Park West, a subsidiary that owns the pension plan’s office complex on Louisville Road in Frankfort. Perimeter Park West failed to pay millions of dollars in dividends it owed over the years to its pension plan, according to the complaint.

According to the complaint, “When plaintiffs inquired about the missing funds, they were told by[KPPA general counsel]Victoria Hale that Clumbaugh Properties had embezzled the funds.”

At the time, Clambaugh Properties of Frankfort contracted Perimeter Park West to clean and maintain the KPPA offices, Clay said. Under the terms of the contract, Crumbaugh Properties was to return unused funds as “dividends,” he said.

Crumbaugh Properties did not immediately call for comment on Friday.

“When plaintiff proposed legal action against Crumbaugh Properties, his proposal was denied because of ‘Crumbaugh’s relationship with the Franklin County court system,'” according to the lawsuit. No further explanation is provided.

Herbert kept asking why Perimeter Park West’s books weren’t balanced. This was facilitated by an inquiry from the County Employee Retirement Plan Trustee. Match it with your suit.

Earlier this year, Herbert discovered that Perimeter Park West’s “financial statements were reporting a ‘cumulative deficit’ that, when combined with other accounting irregularities, amounted to more than $10 million. caused the need for balance entry (such as a plug), which appears to be directly related to the theft committed by Crumbaugh Properties,” the lawsuit states.

KPPA’s internal audit from 2019 corroborated Herbert’s concerns that “Crumbaugh Properties may have misappropriated or stolen funds over several years,” according to the complaint. A recent audit by Blue and Co. LLC “confirmed irregularities in the handling of the pension fund,” according to the complaint.

On October 5, 2021, according to the lawsuit, Mr. Herbert wrote a memo expressing concern that his retirement trust fund accounts were being transferred to external bank accounts without the oversight of the KPPA Board. According to the complaint, KPPA Executive Director Eager sent him an email instructing him not to discuss the matter further with the trustee unless Eager approved such communications.

According to the complaint, “Plaintiff received on May 31, 2022 what appeared to be a dismissal notice signed by Executive Director Eager. It’s done.”

“The actions taken by KPPA executives were in connection with tens of millions of dollars that were regularly wire transferred and tens of millions of dollars held in external deposit accounts outside the trust. do not balance

Herbert has since returned to Florida, his attorney said.

Perimeter Park West has been talked about before.

In 2015, the state’s Comptroller issued a report accusing the state pension system of misappropriating $700,000 in health care benefits for “unwise” real estate deals. Internal Conflicts of Interest.

The Pension Plan purchased 1.9 acres of land next to its Frankfort office for $752,000 in 2006, but three months later, a local veterinarian paid $450,000. KRS then sold the land to the Kentucky State Police for $325,000.

To purchase the property, the pension plan put the funds on its books as an unsecured loan to Perimeter Park West. Most of the loan was forgiven after four months, but Perimeter Park West had the assets to pay off the loan.

Several state pension officials resigned or retired shortly after the land deal was made public.

John Cheves is the Government Accountability Correspondent for the Lexington Herald Reader. He joined the newspaper in his 1997 and previously worked for the Washington and Frankfort bureaus, covering court beats.
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