Iowa residents worried about their retirement funds during the economic recession were given another scare this week.
Two New York investment brokers were arrested Wednesday, charged with allegedly operating a $1.3 billion investment scam. On Monday, Iowa Public Employees Retirement System officials froze $339 million in assets after a federal investigation into Westridge Capital Management Inc. — a Santa Barbara-based firm with offices in New Jersey and Manhattan that managed roughly 2 percent of the pension fund’s assets.
IPERS, Iowa’s largest public-employee fund, was created in 1953 as a retirement plan for state workers.
IPERS spokeswoman Julie Economaki said officials are doing everything they can to take appropriate action.
“The investments earned already are safe,” Economaki said. “We are pursuing additional legal action to get funds back.”
The U.S. Commodity Futures Trading Commission began investigating Stephen Walsh and Paul Greenwood, principals in Westridge Capitol Management, after they failed to turn over documents to the National Futures Association. Westridge completes transactions through WG Trading, a registered investment broker.
UI Associate Professor of Economics John Solow said IPERS probably wasn’t doing anything wrong or ill-advised.
“It was trying to get a good return for people whose pension funds it was investing,” he said. “You have to be cautious about things that seem too good to be true.”
The majority of UI employees are not covered by IPERS, which is charged with investing the retirement money of teachers, law-enforcement officers, government officials, and other state employees.
IPERS has ended its investment contract with Westridge, one of the smallest firms IPERS had contracted. It entered the agreement in March 2007.
According to a release from IPERS, the Westridge findings will not “affect IPERS’ ability to pay benefits, nor do they affect IPERS’ other investments.”
State Treasurer Michael Fitzgerald, an IPERS board member, said currently retired people who receive retirement funds from IPERS should not be worried, but officials are examining their investing strategy.
“We need to be more conservative and thus more safe,” Fitzgerald said. “We are re-evaluating the process for who we trust to manage our money.”
Robert Bailey, the Iowa Department of Administrative Services’ communications director, said IPERS has acted quickly and Iowans should not be too worried about their retirement funds.
“The comfort level is up now that arrests have been made and that there is an earnest effort to recover the missing funds,” Bailey said. “I have total confidence in how IPERS does their business.”
In November 2006, a Daily Iowan investigation discovered $28 million of Iowans’ retirement funds were invested in multinational oil conglomerates and other companies under scrutiny for their actions relating to the genocide in Darfur, Sudan.
IPERS has served more than 312,000 of Iowa’s public-service employees for more than 50 years, investing and safeguarding over $20 billion in assets.
