OKLAHOMA CITY (Legal Newsline) -- Oklahoma Attorney General Scott Pruitt last week announced the next step in the effort to reform and protect the state's public employee pension system.
In response to claims of potential fraud, Pruitt opened an investigation Thursday into whether financial institutions properly handled state pension funds.
"An often overlooked area in pension reform is how funds are maintained by banks and what we can do to ensure investments are handled appropriately. I have launched an investigation to review management of these funds, and if there is any occurrence of fraud, I will take the necessary enforcement steps to recover potential losses of tens of millions of dollars," Pruitt said in a statement.
On Thursday, Pruitt sent letters to several custodial banks seeking data on investment transactions, including those involving foreign currency exchanges, on behalf of pensions for state employees, teachers, police officers and firefighters.
The investigation and potential litigation is similar to actions taken in California, Virginia and Florida to recoup more than $200 million in state pension funds.
"The investigation will reveal whether we need to pursue litigation against fraudulent and deceptive practices," the attorney general said.
Oklahoma's major pension systems have investment assets of $21.4 billion, according to the state Pension Commission.
Like private sector pension systems, public sector pension systems nationwide routinely invest in financial markets in an effort to realize investment gains, the Attorney General's Office explained.
State Rep. Randy McDaniel, R-Oklahoma City and chairman of the House Oversight Committee on Pensions, also will conduct an interim study this year on pension investments as part of the state's efforts to reform the system.
McDaniel's study seeks to determine whether Oklahoma's pension investments are being handled properly and effectively.
"Investment performance has a significant financial impact on the fiscal health of pension systems," McDaniel said in a statement. "Through my interim study, we will look at everything from pension investment policies and procedures to the performance of our outside money managers. With billions of public dollars in assets at stake, it makes good financial sense to take a serious look at these investments."
McDaniel, who is also a financial adviser, said if any mismanagement of pension funds is found, Oklahoma should not hesitate to try to recoup losses.
"Wall Street banks need to be held accountable for their actions. When fraud or deception occurs, there must be consequences. Ethical behavior is an absolute requirement of the investment managers who handle pension fund assets," he said.
"I look forward to working with the attorney general so we can take whatever actions are necessary to continue pension reform in Oklahoma."
This past session, House Speaker Kris Steele, R-Shawnee, and McDaniel authored several pieces of pension reform legislation that reduced Oklahoma's unfunded pension liabilities by billions of dollars and placed fiscally conservative, common-sense policies on Oklahoma's public pension systems.
"Pension reform continues to be a priority in the House because fiscally unstable pension systems can cause fiscal havoc across state government, which risks funding for core services," Steele said in a statement.
"Putting Wall Street on notice is a big time statement that we take seriously our roles as stewards of the public's money. This bold effort also shows Oklahoma's commitment to providing its valued state employees with the stable, fully-funded pension plans they have been promised."
From Legal Newsline: Reach Jessica Karmasek by email at firstname.lastname@example.org.