The $2.6 billion Detroit General Retirement System faces a class-action lawsuit filed in Michigan state court by its participants and beneficiaries, because of what the suit calls “indefensible” investment losses of $100 million, according to a news release from the plaintiffs’ attorney.
“Based on even a cursory inspection of the proposed investments, a rational, prudent person would not have invested in the proposals, let alone with entrusted pension funds,” according to the release.
The lawsuit alleges violation of the state Public Employee Retirement System Investment Act, two counts of breach of fiduciary duty, one count of gross negligence and one violation of the Michigan Constitution.
The case will go before Wayne County Circuit Judge Amy Hathaway in Detroit.
“It’s our position that there was little if any due diligence performed before people voted to invest tens of millions of dollars of hard-earned money,” plaintiffs’ attorney Gerard Mantese, partner with Mantese & Rossman, said in an interview. “In just a couple hours, our law firm found concerning information about some of these investments that was publicly available before these investments were ever made. When someone has judgments or liens against them, you don’t invest $10 [million] or $20 million with that person.”
In a statement, the system said its board of trustees was “surprised by the recent filing of this lawsuit.”
“Investment decisions are not made by any one trustee, but by the board as a whole,” the statement reads. “While the board strives to choose the best investments available, not all prove to be profitable. There will always be some that outperform others—particularly in down economies as we have seen over the last year.”
The statement from the board said that as of March 31, the fund has posted better investment results than 78 percent of U.S. public pension funds with assets over $1 million, and is 104 percent funded. It said that since the “plaintiffs have suffered no loss or damages, the GRSD believes this case is without merit.”
Filed by Timothy Inklebarger of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail firstname.lastname@example.org.
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