SEC ends inquiry into Florida pension agency, takes no action

TALLAHASSEE — A two-year federal investigation into possible fraud at the Florida State Board of Administration, the agency that manages $138.5 billion in retirement funds for state and local governments, ended this week with no action taken.

The Securities and Exchange Commission wrapped up the inquiry with a two-sentence letter faxed to the SBA late Wednesday.

"This investigation has been completed as to the Florida State Board of Administration, against whom we do not intend to recommend any enforcement action by the commission," wrote Eric R. Busto, assistant regional director for the SEC's Miami office.

Busto then attached a copy of a 1972 securities act that indicated the SEC could reactivate the investigation if it deemed necessary and that the termination letter "must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff's investigation of that particular matter."

The SBA manages state employee pension funds and dozens of other investments for state and local governments, including 1 million current and future retirees. The SEC had been investigating whether the SBA and three large Wall Street firms had misled the public about the risk and liquidity of securities the state purchased from the firms.

The securities sold to the state by JPMorgan Chase, Credit Suisse and the now-defunct Lehman Bros. plummeted in value in late 2007, leading to the implosion of an SBA-managed local government pool that year.

Both SBA managers and the board — which consists of Gov. Charlie Crist, Attorney General Bill McCollum and Chief Financial Officer Alex Sink — breathed a sigh of relief when the receipt of the letter was casually announced at the board's quarterly meeting Thursday.

"I rather expected it, but it's very good to have it formalized," McCollum said.

Ash Williams, executive director of the SBA, said the letter means the agency never violated portfolio guidelines when it purchased the troubled assets but he could not draw firm conclusions.

"The SEC never comments on what they're doing and what they're thinking," he said. "We were delighted to receive it."

Williams came under fire from the board in November after the St. Petersburg Times reported that the agency had been under SEC investigation since 2008 but had not alerted Crist, Sink and McCollum.

He said that the inquiry began before he started working for the SBA and that he considered it procedural in nature. Federal investigators, however, elevated it to a formal fraud investigation, subpoenaed reams of documents and interviewed the agency's top managers.

The faxed letter wasn't the only piece of good news the board received Thursday.

Florida's state retirement fund's investments increased 16.3 percent since June, the fund's managers said, the first improvement in the Florida Retirement System Pension Plan since the $113.1 billion fund lost 19 percent in 2008-09.

A review of the state's pension plan performance by Ennis Knupp & Associates, an investment consulting firm, found that the state accounts performed equal to comparable funds of its size and class.

Mary Ellen Klas can be reached at meklas@MiamiHerald.com.

SEC ends inquiry into Florida pension agency, takes no action 03/04/10 [Last modified: Thursday, March 4, 2010 9:43pm]

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