State Rep. Mark Lowery, R-Maumelle, said Wednesday that the executive director of the Arkansas Teacher Retirement System should tender his resignation because Lowery doesn't believe part of the director's testimony to lawmakers on Tuesday.
System Executive Director George Hopkins said Lowery is entitled to his opinion, but he disputed Lowery's suggestion that he misled lawmakers.
Lowery, a co-chairman of the Joint Performance Review Committee, said Hopkins was not truthful when he denied knowing about referral fees paid to attorneys in lawsuit settlements.
In sworn testimony to the Legislature's Joint Performance Review and Retirement committees, Hopkins repeatedly said that, until a special master raised questions about a $4.1 million referral fee paid to Texas attorney Damon Chargois, he didn't know that the fee was part of $75 million in attorneys' fees awarded in a $300 million settlement with Boston-based State Street Corp. in a class-action lawsuit filed by Labaton Sucharow law firm on behalf of the retirement system.
Hopkins also testified that special master Gerald Rosen's report is clear that the referral fee was not paid to "this Herron guy," referring to Texas attorney Tim Herron, who is no longer law partners with Chargois.
He said he has learned that Chargois was paid a total of "somewhere around $1 million" in referral fees in six other cases in which the Labaton Sucharow law firm filed suit on behalf of the retirement system. But he said he has directed the system's law firms not to pay any referral fees, and that any fee that is shared by a law firm with another firm in cases for the system has to relate back to work done, be reasonably proportionate and "can't be just what they call a blanket referral fee."
Nonetheless, Lowery said in an interview that Hopkins should have been more diligent in asking the retirement system's securities monitoring firms about paying referral fees, and he "should have caught" the referral fees paid in these class-action lawsuits that Labaton Sucharow filed on behalf of the system.
Hopkins has said he spent several hundred hours working on the class-action lawsuit and the retirement system is going to get a return of no more than $300,000 from the settlement, and "that's a pretty poor return," Lowery said.
Lowery told the Arkansas Democrat-Gazette on Tuesday that whether Hopkins should resign is up to the system's board of trustees. Then, he had a change of heart Wednesday morning and called for Hopkins' resignation while speaking on conservative talk radio host Paul Harrell's show on Conduit News Radio.
State Rep. Doug House, R-North Little Rock, who is co-chairman of the retirement committee, said Wednesday that Hopkins' testimony that Hopkins didn't know about the referral fees paid to Chargois "lacks credibility."
But House said he doesn't have an opinion on whether Hopkins should resign because Hopkins works for the system's board of trustees and House holds the trustees responsible.
Hopkins has been the teacher retirement system's executive director since December of 2008, and his state salary is $180,108 a year. He is a former Democratic state senator from Malvern, who served as co-chairman of the Joint Committee on Public Retirement and Social Security Programs.
As for Lowery's call for his resignation, Hopkins said in a written statement: "I would respond that ATRS had the No. 1 investment return of any public pension plan in the United States in 2017."
"During my tenure as executive director over the three and five-year periods, the investment return of ATRS has been in the top 1 percent of all public pension plans in the nation," Hopkins said.
"Any successful system can be better and I appreciate the positive suggestions the committee made for all Arkansas public retirement systems," Hopkins said. "I will be recommending to the board implementation of the committee's suggestions where applicable to ATRS; however, nothing in the special master's extensive report or any statement made in the over three-hour meeting even came close to supporting the conclusion Mr. Lowery is suggesting."
As for Lowery's claim that Hopkins should have known of the referral fees, Hopkins said Labaton has confirmed that the fee petitions filed with the court in each of these cases did not disclose referral fees paid to Chargois and "the special master's investigation confirmed that Labaton did not disclose the referral fees to me."
The Labaton Sucharow law firm filed the lawsuit against State Street Corp. on behalf of the teacher retirement system in 2011, and U.S. District Judge Mark Wolf approved the settlement in 2016. Wolf later appointed retired federal judge Rosen as special master to investigate the attorneys' fees after the Boston Globe raised questions about some of them.
Rosen has recommended that the three law firms involved disgorge more than $10 million in attorneys' fees, including the $4.1 million referral fee paid to Chargois.
The law firms are Labaton Sucharow, Thornton Law Firm LLP and Lieff Cabraser Heimann & Bernstein. Labaton Sucharow has maintained that Rosen wasn't satisfied with only finding a self-reported inadvertent billing error. The firm said Rosen suggested that the lawyers engaged in questionable conduct by paying a referral fee, although the payment was permissible under Massachusetts law.
On June 28, Wolf rejected Labaton Sucharow's request that he recuse from this case. The law firm has appealed his ruling to the 1st U.S. Circuit Court of Appeals. Among the issues is a private sidebar on May 30 in which Wolf suggested that when Rosen's report became public, "there are going to be questions about the origin of this relationship and whether all of those millions of dollars stopped with Mr. Chargois."
Hopkins told lawmakers Tuesday that he knows how Chargois spent that money, but he's under court order not to disclose that information, and he suggested lawmakers won't be unhappy when that information is unsealed.
When asked whether Hopkins should resign, system trustee and state Auditor Andrea Lea said: "I sat and listened to the explanation at the legislative meeting yesterday and heard nothing new that gives me any concern.
Asked if she believes that Hopkins didn't know about these referral fees paid to Chargois, Lea said Hopkins testified that he asked Labaton not to be informed about allocation of the attorneys' fees.
"I have to take George at his word. George has never lied to me previously. There is no reason for me not to believe him now," said Lea, a Republican from Russellville.
System trustee and state Treasurer Dennis Milligan said in a written statement that "I respect George and while I appreciate the notion that more due diligence could have been done in this situation, he has been an honest person to work with at Teachers and at the Arkansas 529 Board.
"I think it is premature to call for his resignation at this time," said Milligan, a Benton Republican.
Metro on 07/19/2018
Print Headline: Legislator calls for retiree-fund leader to resign