Corporate & Securities Law

Delray Beach Police & Firefighters Pension System Sues Citigroup And Smith Barney Asset Management For Improper Monitoring, Evaluation And Management

By James Eccleston

'Delray Beach Police & Firefighters Pension System estimated that it sustained at least $9 million in investment damages over alleged fiduciary breaches in the consulting work done by a Citigroup Global Markets unit, according to the lawsuit filed by the $120 million fund.

Smith Barney Asset Management, which was acquired by Citgroup in 1998 and also called Salomon Smith Barney, was the investment consultant to the Delray Beach, FL system from 1995 until it resigned in 2006.  The system's board of trustees has been investigating Smith Barney's consulting work since 2005.

The complaint, filed November 12 states that the "board is entitled to recover from SSB the value of the additional return on investment that the fund's investment portfolio would have achieved had the performance of that portfolio been properly monitored, evaluated and managed - an amount that the plaintiff estimates to exceed $9 million."  Plus the board is seeking recovery of fees paid to Smith Barney "and profits that SSB received from activities that placed it in an undisclosed conflict of interest with the fund." 

An estimate of the fees was not in the suit.  The suit also alleges SSB recommended managers that would use SSB as a broker to enable SSB to earn commissions on trades, a conflict of interest never disclosed to or authorized by fund trustees.  Among other claims, the suit alleges "SSB painted a rosier picture of the fund's performance than was actually true,"encouraging "the board to keep SSB in its position as the fund's pension consultant, which, in turn, enabled SSB to continue to engage in self-dealing...at the fund's expense."'

Further questions should be directed to attorneys at SNSFE.

Source:  Pensions & Investments

Full post as published by FinancialCounsel on December 16, 2008 (boomark / email).