In an unexpected move, Attorney General Daniel Cameron has filed a motion to be added as an “intervening plaintiff” in the lawsuit filed by persons with retirement funds held by the Kentucky Retirement Systems (KRS).
The lawsuit alleges that a number of investment firms sold KRS “black box” investments that actually harmed the financial status of KRS, while at the same time collecting millions in fees. The lawsuit also names various KRS trustees and officials who served during the time of the investment, accusing them of knowing that the KRS funds were in trouble financially, and yet trying to cover up that fact in their management of the funds and their annual reports.
A U.S. Supreme Court ruling in 2019 ruled that individual pensioners could not bring such lawsuits, because they did not have standing to do so. Essentially, the ruling said that since their own retirement payments (or anticipated payments) had not yet been reduced, they had not suffered harm. The Kentucky Supreme Court cited this ruling when it ruled that this particular lawsuit suffered from the same problem: the persons bringing it did not have standing to sue.
With AG Cameron joining the lawsuit, the question of standing may be moot, as it would appear that the Commonwealth of Kentucky should be able to sue in the case of harm to one of its agencies.
An interesting side note, as pointed out by David Sirota in his story about this action, is that Cameron, a Mitch McConnell protege, is going after Steven Schwarzman as one of the defendants. Schwarzman is a large financial supporter of McConnell, having donated millions over the years to PACs affiliated with McConnell.
For anyone familiar with the backstory, Cameron’s filing in the lawsuit is a long recitation of the history of KRS going from fully funded in 2000 to being one of the most under-funded pension systems in the country by 2016. The use of “funds of funds” as investment vehicles — funds consisting of other funds, which consisted of still other investments — meant that it was basically impossible for KRS to know what it was actually investing in.
Since the Kentucky Supreme Court has already dismissed the original lawsuit, this action by Cameron may have no bearing on the case. So, one legitimate question is, why do this, and why now? One person we spoke with, who has some knowledge of the backstory, pointed out that the lawsuit focuses on actions that took place, and persons who served, under Democratic administrations. “The lawsuit names a lot of old Beshear hires and acquaintances, perhaps building a narrative for a 2023 run against Andy Beshear.”
Whatever the motivation, this filing by Attorney General Cameron could revive the dismissed lawsuit, and could lead to depositions and even testimony about the actions described in the filing. The “black boxes” could be opened. The fees and profits could be made public. And, if the plaintiffs prevail, some amount of compensation could come back to the Commonwealth.
As a well-known television host often says, “Watch this space.”
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If you want to dig into the filing, especially for the backstory, it is here.