Tuesday, July 7, 2009

CSG, County's Pension Adviser, Faces New Legal Action by SEC

Posted By on Tue, Jul 7, 2009 at 11:21 PM

24f0/1247028149-csg_logo.jpgConsulting Services Group, the Memphis-based investment firm which advises Shelby County on the disposition of its pension assets and has been implicated in various alleged improprieties, may soon be taking another hit.

According to the Bloomberg financial news service, CSG has been warned by the Securities and Exchange Commission that it may be the target of litigation. The SEC suit would be in connection with a New York State bribery scandal, previously reported by the Flyer (here and here ), in which CSG purportedly paid a $1.5 million bribe to persons connected with the New York Comptroller’s office for the right to manage the state’s pension assets.

New York attorney general Andrew Cuomo secured bribery indictments against several of the New York officials and other principals involved in the scandal, but CSG, though it has repeatedly come under adverse media scrutiny, had so far escaped legal consequences.

The indictments specifically state that CSG arranged with a middle-man at the Searle investment brokerage to pay him 30 percent of the fees it received from handling
New York’s assets.

Forbes Magazine, in a scathing treatment of CSG's operations entitled "Tainted Pension Fund Advice," questioned the company's reliance on Trading Services Group, an in-house broker-dealer, and said further:

You might think that being in the business of advising pension funds where to invest and then steering them into Ponzi schemes run by Bernard Madoff and Bayou Group would damage a consultant's reputation. Or that cheating on federal ethics forms and having regulators bar a cofounder from a supervisory role would hurt business. Or that having its practices described in an independent report as "subject to myriad conflicts of interest" might tarnish its reputation.

Not at Consulting Services Group. Despite suffering all of the above, the Memphis, Tenn. firm is going strong, advising 42 public and private pension funds on how to allocate $16 billion and which money managers to hire--even while taking money from some of those same managers for steering business their way.

The company, while advising clients that it may be the target of the SEC action, continues to deny any improprieties.

Adverse publicity for CSG in Forbes, the Wall Street Journal, and other national publications — as well as local attention given the firm’s activities in the Flyer and elsewhere — prompted Shelby County Mayor A C Wharton to recommend to the county pension board that it consider switching to another consulting firm.

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