Arkansas Teacher Retirement System money from lawsuits raises tension

State legislator takes issue with amount Hopkins cited

A state lawmaker Wednesday tangled again with the departing head of the Arkansas Teacher Retirement System over the latter's testimony in July regarding how much the system has recovered through class-action lawsuits.

The Teacher Retirement System is state government's largest retirement system, with more than $17 billion in investments and more than 100,000 working and retired members.

In mid-July, state Rep. Mark Lowery, R-Maumelle, called for the resignation of George Hopkins, the executive director of the system.

At the time, Lowery said he didn't believe Hopkins' testimony to lawmakers that the director didn't know about, until a special master's inquiries, a $4.1 million referral fee paid to a Texas attorney in a settlement of a lawsuit in which the system was a class representative. Hopkins disputed Lowery's suggestion and declined to resign. But Hopkins announced Oct. 1 that he would retire by the end of this year.

During a legislative budget hearing Wednesday afternoon on the system's funding request for the next two fiscal years, Lowery leveled another allegation at Hopkins regarding his testimony in July.

Lowery said Hopkins "has told us that teacher retirement has recovered in excess of $40 million through various class-action lawsuits, and, as you are aware, I did ask for an accounting of that, and it turned out it was closer to $2.1 million."

Hopkins countered that "anytime that we get money that's not directly from an investment but from a third source, we consider that a recovery, and my testimony was on the aggregate, from all class action [lawsuits], ATRS has recovered $40 million.

"But the ones in which we were lead plaintiff or class representative, we had recovered over $2 million," said Hopkins, who is an attorney and a former Democratic state senator from Malvern.

"My testimony might not have been understood, but in terms of class actions throughout, we had recovered $40 million. But my testimony was not that ATRS recovered $40 million in cases in which we were lead," Hopkins said.

Lowery said there wasn't a misunderstanding about Hopkins' testimony. The Teacher Retirement System was a class representative in a class-action lawsuit with State Street Corp. in which there was a $300 million settlement and $75 million in attorneys' fees awarded, he said.

Hopkins replied that the "$40 million is what ATRS has recovered in all class-actions, in which we were able to obtain money from a company because of their failure, but in all of those, we were not the lead plaintiff or class representative."

Lowery said there were "press accounts of $40 million" going to the system.

In mid-July, Hopkins told the Arkansas Democrat-Gazette that the Teacher Retirement System has collected more than $40 million as a result of securities class-action lawsuits, including those in which the system was lead plaintiff over the past 10 years.

Hopkins told Lowery on Wednesday that "teacher retirement got $40 million from class-actions all in the last 10 years" but wasn't the lead plaintiff in all these lawsuits.

"The deposit accounting doesn't show $40 million," Lowery said.

Hopkins said the system's custodial bank, State Street Corp., typically receives settlements in class-action lawsuits without it passing through the system.

"Occasionally a check will come to ATRS, which we deposit in our liquidity account," Hopkins said.

Lowery then pressed Hopkins about whether the system will continue being involved in class-action lawsuits.

"I think I heard from you that, although ATRS has recovered $40 million in class-actions overall, perhaps other retirement systems ought to focus on that and ATRS less, and I think the board [of trustees] has probably heard that loud and clear," Hopkins said.

"I will not be there to make that decision. I am going to retire because it is the right time for me to do it," he said. "I think that the new executive director, when that person comes in, he or she, probably will want some time to focus on just learning the ropes at ATRS and dealing with all these investments."

"I don't want to direct their actions from the sideline. I think they need to make that decision themselves, the board and the new executive director," Hopkins said.

Senate Democratic leader Keith Ingram of West Memphis said the system has had "phenomenal" investment returns under Hopkins' leadership.

Hopkins has been there for 10 years, and in that time, the system's investment return has averaged 7.6 percent a year to rank among the top 2 percent of similarly sized public retirement agencies nationally, according to the system's investment consultant.

"Because of the performance in the last 10 years, it is going to be very important who fills those shoes," Ingram said. "I have, like I'm sure many senators and representatives in here, have gotten, emails and letters of concern regarding the retirement fund and who is going to follow.

"It seems to me that one of the things that is a strength of this state and our teachers is our retirement fund, that it sort of offsets a little salary disparity with the states that are around us," Ingram said. "I have had superintendents come to me and say, 'If we lose this, this will really hurt us as much as our salaries.'"

Ingram asked why the system has performed better than similar ones in surrounding states.

"There has been a great relationship between ATRS and the Legislature because, unlike most other states around us, other than a couple blips, a few times, the Legislature has funded the requirements of the system, where other states decided a few times to take a pass on properly funding those systems," Hopkins said.

"That's what happened in Kentucky and other places. You can't fail to fund retirement systems' needs and expect it to do well. Arkansas has done a phenomenal job with its retirement systems," Hopkins said.

Metro on 10/18/2018

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