Report: Baltimore retirement fund board chair recruited business partner to oversee $1.6 billion in investments

The chairman of the board of Baltimore’s Employee Retirement System has been removed and its chief investment officer is out of a job amid an inquiry that found they had an undisclosed business relationship of more than 30 years, according to an inspector general’s report Thursday and city officials.

The report said the board chairman recruited the executive to the post overseeing investments for the $1.6 billion system that administers the plans of more than 18,000 current and former city employees.

“The board member also sat on the interview panel and wrote many of the interview questions,” during the hiring process, the inspector general’s office wrote.

The officials are not identified in a summary of the report posted online, but Comptroller Joan Pratt and Finance Director Henry Raymond confirmed they were board chairman Jerome Sanders and executive Eliot Powell.

Sanders and Powell had been in business together since 1985, according to the inspector general’s report, and were still involved in several ventures together. Neither reported their relationship on disclosure forms, the inspector general said.

Once he got the job in December, Powell didn’t show up for work most of the time and tried to steer $15 million in the system’s funds to an investment firm where he had personal investments, the report said.

Reached by email, Sanders said he was not familiar with the inspector general’s findings.

“This is the first I’m hearing of this,” he wrote.

Powell could not be reached for comment.

The inspector general’s report is the second in recent weeks to call into question the leadership of the city’s pension systems. A previous report found that an official at the 401k-style fund that the city offers new employees misused money to pay for an office renovation. After that report was released, the city finance director said Roselyn Spencer, the executive director of both pension systems, was no longer in her job.

Raymond, who serves on the boards of both pension systems, said Sanders was told before the retirement system’s September board meeting that “his services were no longer required.”

Pratt is now serving as chairwoman.

Powell, who was being paid $153,000 a year, is no longer working for the city. Raymond declined to discuss the exact circumstances of Powell’s departure, saying it was a personnel matter, but said “the actions related to both [men] were a direct result of the inspector general's report.”

Raymond also said that the pension systems’ general counsel, Ian Berger, no longer works for the city. He declined to say why Berger left.

The inspector general’s office said Powell and Sanders have been in business together, and corporation records and city ethics disclosures show they are partners in a project to build a 190-mile gas pipeline on the Eastern Shore.

In financial disclosure forms filed with the city’s Ethics Board, Powell and Sanders each listed a 50 percent stake in a company called LVI Power. The company’s website says it’s involved in a project to build a natural gas pipeline running the length of the Delmarva Peninsula. Incorporation papers for H4 Capital Partners, which Powell listed himself as part owner of, were signed by both men. H4 is listed in corporation records as the owner of the Delmarva Pipeline Co. trade name.

Inspector General Isabel Mercedes Cumming and pension board members sought to assure employees and retirees Thursday that their money was safe. Cumming credited city leaders for taking quick action on her investigations’ findings.

“Not one time have they tried to sweep it under the rug,” she said. “They just move forward with a very quick response. That is a good reflection on the city.”

Raymond said the investigations’ findings had no impact on employees or retirees’ money.

“All employee accounts are safe, secure and have not been altered or tampered with,” he said. “All pension members should feel very safe that their investments are secure.”

Pratt said the board reacted quickly when it learned of the inspector general’s findings. She said she wanted to “reassure the members that the ERS is financially sound and that the board has taken steps to make sure that their funds are protected and that they, as in the past, are prudently invested.”

Pratt said the board is seeking a replacement for Powell and that David Randall, the deputy director of a separate police and fire employees retirement fund, is stepping in to run the affected fund. Pratt said operations manager Corey Robey is now in charge of the 401k-type fund, known as the Retirement Savings Plan.

On Thursday, the first thing visitors to the website of the city retirement system saw was a letter assuring them of the system’s stability.

“The Board of Trustees is focused on ensuring the hiring of the best administrative team possible,” the letter reads. “We know that we and the new team have to rebuild the trust of the remaining staff, and the ERS members and stakeholders.”

Then-Mayor Stephanie Rawlings-Blake appointed Sanders to the board, according to the system’s spring 2013 newsletter. Appointees can serve two 4-year terms. The board elected Sanders as chairman at its December 2017 meeting.

Pratt said the $15 million Powell tried to steer to the investment management firm where he had invested was ultimately never transferred. Earlier, Powell emailed a representative of the firm letting them know of his recommendation to use the firm. But after talking with a lawyer, Powell recused himself from discussions surrounding the investment.

Pratt said the board was already aware that Powell had not been in the office and ordered him to show up; the inspector general’s report said he was absent more than 60 percent of the time between December 2017 and August 2018.

“The official claimed he worked remotely, however the OIG found no telework agreement in place,” the report said.

Powell was placed on leave while the board reviewed the management of the pension systems.

“We needed to find out exactly what was going on,” Pratt said.

Neither Sanders nor Powell lived in Baltimore, as required by the city charter; they had Florida drivers’ licenses, and one filed Florida taxes. Powell listed a Florida address on his ethics disclosure form. They planned to share an apartment in Anne Arundel County when they were in Maryland, the report says.

The report said a Baltimore City Council member’s complaint about time and attendance fraud prompted the investigation.

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