The Ongoing Saga of the South Carolina Retirement System
I don’t know what to make of the ongoing battle between Treasurer Curtis Loftis and the South Carolina Investment Commission. Ever since the Treasurer took office in 2011, he has been battling the Commission to gain access to information underlying the state pension’s returns and fees. At one point, the Commission censured the State Treasurer for aggressively pursuing these matters. Then they sued him for failing to approve the transfer of cash to fund one of the pension’s investments. He claimed that the Commission’s instructions to transfer cash were insufficient. I wouldn’t have picked that fight. In any event, the South Carolina Supreme Court admonished both sides and dismissed the suit when the Treasurer released the funds.
During the summer the State Treasurer reached a settlement with BNY Mellon over losses in the state’s securities lending program. In his lawsuit, Mr. Loftis sought $200 million in damages. He settled the case for $25 million, plus $8 million paid to two South Carolina law firms. In exchange, BNY was granted a ten-year contract. While the Treasurer touted the settlement as a great victory for South Carolina, my guess is that BNY and the two law firms were the big winners in the matter.
The soap opera has continued in recent weeks. Apparently someone from the Commission intimated to the press that the BNY settlement would cost the pension plan more than existing securities lending program. The Treasurer didn’t take kindly to this story and pressed Commission staff for the source of the leak. He also joined a number of critics in attacking the Commission for paying $1.4 million in bonuses to staff despite the lackluster performance of the pension plan.
In the latest episode, the State Treasurer and the Commission’s Chief Operating Officer exchanged heated words. The Treasurer claims he was threatened. The COO claims he was bullied. Last week the COO, Darry Oliver, resigned saying he couldn’t stand any more abuse. At a Commission meeting, the Chairman refused to let the Treasurer speak on the interchange with Mr. Oliver, so Mr. Loftis walked out. The Commission immediately appointed one of the Treasurer’s most vociferous critics, former State Senator Greg Ryberg, as the new COO. While Mr. Ryberg has a background in real estate, he doesn’t seem like a good fit to be COO of a pension investment shop. Moreover, it’s rather curious that the Commission would accept Mr. Oliver’s resignation and appointment Mr. Ryberg in a matter of hours.
As I mentioned at the outset, I don’t what to make of this dispute. I continue to believe that Treasurer Loftis has raised legitimate questions about the performance achieved and fees incurred by the South Carolina Retirement System. I can also understand how the Commission staff has felt under siege as the Treasurer and his staff bombarded them with information requests. Unfortunately, the wellbeing of South Carolina’s pension plan is being held hostage to a deep political rift between the State Treasurer and the Chairman of the Investment Commission, Reynolds Williams. By the way, this is a war between Republicans. In the end, South Carolina’s civil servants and taxpayers are the losers because of this rift.