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Let me start by thanking James Manning, our Investment Commission staff Director of Technology, for his work with SC ETV to enable us to be fully transparent in this Commission meeting. It was interesting for me to observe the
entrepreneurial negotiations between 2 state agencies to deliver this much needed service. Many of you may not realize that James Manning also serves on the Richland 2 School District Board. Thanks James for your work here and your civic
involvement and commitment to make South Carolina a better place. I also wish to recognize the nearly 150,000 retirees for their involvement in the operation and accountability of the Investment Commission. We all work for their benefit and the benefit of the additional 223,000 working members of the Retirement System. The Trust Fund is their money—all of them. I trust that we all will keep this in mind today and every day. Let me now give you my observations and expectations of the Investment Commission and my task ahead.
Many of you may know that I come to this position with what I consider a very deep background in this issue. I authored or co-authored every piece of legislation dealing with the Investment Commission going back to its creation in 2005. I authored or coauthored the recent major legislation concerning the Retirement Systems including the creation of the Public Employee Benefits Authority which is the trustee of the Fund that the Investment Commission invests. I had, and I have, a passion for this subject which for too long was a can kicked down the road. I have an intimate knowledge of the issues surrounding the SC Retirement System and the
Investment Commission and of the sentiments of decision makers in SC relative to those entities. One of those sentiments that I am compelled to point out is Section 9-1-1310 (A) of the South Carolina Code that provides that, “The Retirement System Investment Commission shall invest and reinvest the funds of the retirement system….” The General Assembly created the Commission as a whole to be the sole investment authority. No provision or authority exists for any lone public official to veto or amend an investment decision of the Commission. The General Assembly also provided that the Commissioners, with one exception, be qualified
individuals, that is that they have some sort of work experience or education that would inform them of just what is going on here. The point of that was to take the politics out of the investment of the participants in the plan, both employees and retirees. The one individual that may serve without those qualifications, of course, is the Treasurer of the State of South Carolina. It is the case that the holder of that office may appoint someone with those qualifications, just like the other members of the Budget and Control Board, but that is not mandatory. Now, my understanding is that there may be some confusion as to why the General Assembly decided to leave the possibility open for that
seat to be held by a person without the otherwise necessary qualifications. The reason was, very simply, that the General Assembly at the time held thenTreasurer Grady Patterson in the highest regard. Mr. Patterson had been the State Treasurer since 1966 with only one four-year hiatus, and Mr. Patterson, as State Treasurer, had been the manager of the investments of the Trust Fund for all of those years. He was a gentleman of serious and calm demeanor, and he had proven himself over several decades of service as honest and trustworthy. Mr. Patterson, as you all know, was a Democrat, but he was very, very highly respected by all members of the General Assembly. He was a decorated
war hero—AND HE WAS QUALIFIED! For those reasons, I had no qualms about Mr. Patterson serving on the Commission. The General Assembly simply failed to anticipate in the statute the day when Mr. Patterson would be gone. The General Assembly nonetheless, as noted in Section 9-1-1310 (A) of the South Carolina Code, was clear about the fact that each individual, regardless of whether or not they hold one of the qualifications, simply serves as a voting member of the Commission, nothing more and nothing less. Each individual is one of six votes, period. An assertion to the contrary contradicts the law.
I tell you this as a person who was there when it was written and when it was voted into law almost unanimously by both Republicans and Democrats. I know what the law says and why it says it, and I will operate the Investment Commission accordingly. Those who want to operate differently will do so only following a decision by a court. I am pleased to have finished nearly six weeks as Chief Operating Officer at the Investment Commission. I also am pleased to report that the atmosphere in our office has been calm and steady. Our staff is working hard and functioning like I think you would envision any other investment office of our size.
In a recent discussion with an agency director, he said that if he were to list the 10 assignments that he wouldn’t take, this job at the Investment Commission would be on that list. To me that was true irony because in retirement, if I had established my own bucket list of potential jobs, then this would be my number 1 pick— period. I regret the conditions that led to my arrival, but those are past. I am committed to moving forward. I operate in the present with the eye to our future. My commitment includes my intention to address potential issues early and straightforwardly and to arrive at solutions quickly. This office is a business office and not a
political office, and, as such, it must enjoy proper decorum, mutual respect, and stability to function properly. To date in my dealings with Investment Commission staff, I have found them to be honest, competent, hardworking and totally committed to maximizing our investment return within the risk profile that is consistent with the Annual Investment Plan. I am truly proud to have the opportunity to work with such dedicated public servants, and I believe that they will continue to succeed on behalf of the retirees and employees covered by the South Carolina Retirement System.
I have not discovered any evidence of assertions made by others including: altered financial statements; waste of state assets; inadequate internal controls; violation of state security laws; or ethics issues involving conflicts of interests. I have looked closely for evidence of the last charge concerning ethics, and I have found absolutely none. I have not found a “hidden world…that no one knows anything about”. I have not found true the accusation that “the Commission misleads the public at every turn” or that it “is deceitful….” I have not found anyone here that is “dishonorable” or that “lacks a moral core”. There is an excellent moral core at the Investment Commission
that has been unjustly belittled and demeaned. As I am certain you are aware this has had an adverse effect on our team’s morale. I have reviewed previous Commission meetings not only thru the videos but also thru the minutes, and it appears that the meetings very easily can be made more efficient and effective. Very often allegations are made that at a very minimum are misleading and upon further review are discovered to be untrue. In addition there are topics that are mentioned as an aside but that deserve more attention than a sound bite or a non-productive argument. The statement from the September meeting that a discovery was made of a “previously unreported”
$1 billion loss is an example. That statement was not supported by any evidence at the time, but it certainly qualified as political red meat for the cameras. I learned in my previous life as a politician of 20-plus years that sometimes the truth doesn’t get in the way of a good sound bite, but responsible adults handling someone else’s retirement money cannot operate in that fashion. I suggest going forward that such non-agenda items be identified by the Chairman to be noted in the minutes as a Pending Question. Upon conclusion of the meeting all Pending Questions will be listed and sent to all Commissioners. Staff then will provide the relevant facts that address the question and those will be included with
the finalized minutes. This, of course, is at the discretion of the Chairman and is only a suggestion on my part, but it may help us avoid lengthy distractions during the scheduled business of a Commission Meeting. I was privileged to own and operate my own business for twenty-two years, and I was honored to employ at its height over five hundred wonderful individuals. I always felt that my employees, whether there were five or five hundred, worked with me and not for me. My policy toward employees will be exactly the same here as it was in my business. I will demand respect and congeniality among all, and I cannot allow hostility,
management. Efforts to control or blame Investment Commission employees or to be intolerant of their views likewise will not be allowed. My hope is that such situations never will arise, but I believe that my record on these issues is clear. Investment Commission employees will work in a safe environment. Again my intention is that the Investment
Commission be about the business of maximizing our investment return within the risk profile which is consistent with the Annual Investment Plan. It has been my experience thus far that Investment Commission staff also has this as their number one priority. This fact is a
tribute to those Commissioners who have hired and developed the administration and staff despite the politics thru which they have had to navigate. Our ultimate bosses, the over 370,000 South Carolina retirees and employees, deserve no less. This is my sole focus, and it is shared by Investment Commission staff. I will not allow that focus to be diverted. I have noted that some press accounts have cast my hiring as a prelude or indeed an invitation to some sort of combat. Nothing could be further from the truth. I have said, and I will say again, that I came here to work for the over 370,000 participants in the South Carolina Retirement System, retirees and active employees, such
as you see on the screen. I am working to keep the smiles on their faces, and combat is not going to achieve that. I attempted to begin my tenure on the right foot by sending a letter to Commissioner Loftis that contains many of these sentiments. I welcomed him in the letter to “visit my office at any time going forward to inform me of your concerns, complaints or grievances.” I said that, “I will listen, and I will act in accordance with what is best for [the Investment Commission].” I have had no reply to that communication, and I only can conclude therefore that all is well. My belief is that differences of opinion are not personal and can be constructive. This was quite evident
when we in the General Assembly developed the Investment Commission and when we later adopted revised benefits that were consistent with our ability to fund them. Constructive differences were resolved thru dialogue and not thru an uninterested intermediary such as the Wall Street Journal or the New York Times. I have been asked about my work schedule, and my reply is that I am on the job 24/7. When I had the honor of serving in the South Carolina Senate my home phone number was always listed and my personal cell phone number was and still is on my home answering machine. Whether I am in the Commission office, or a Senator or House member’s office, I am never out of reach by phone
or email, and I know that those who have contacted me have found me responsive. This is not a part-time job for me. I cannot work parttime and repair what the Inspector General calls an “increasingly toxic workplace” that undermines “RSIC’s energy and focus on its core mission.” I want to repeat that the Inspector General called the offices of the Investment Commission an “increasingly toxic
workplace”. I have told you, and I believe, that such an atmosphere is not a result of any of the staff in this office. Too much damage has been done for me to give this job anything less than my full-time attention and my full-time effort.
I fully understand the job ahead in all its components. I will not stop until that job is finished, and I will not allow distractions to further undermine the good people here and the work that they do on behalf of the employees and retirees of South Carolina. Those familiar with my tenure in business and in the South Carolina Senate know that I don’t seek confrontation- however backing away when confronted, especially with petty and non-constructive matters, is not an option for me. The Senators that I served with know that the one attribute that I took into elected office—and the one that I left elected office with—is my integrity. I did not allow that to be questioned then, and I will not allow it now.
I appreciate the people who work here. I appreciate the stakeholders with whom I have met and whose concerns I have heard. I appreciate those who have entrusted to me the task of preventing further harm to the Trust Fund and indeed setting the Commission on a positive path. I hope that everyone in this room shares that goal. We have limited time for those who do not. I want to close with a couple of items. The Commission voted for a budget proposal that seeks to add several FTEs in the coming fiscal year. The FTE request not only seeks to establish the proper personnel level for an investment office with our particular mission but also to reduce the amount of fees that we pay to
external managers for the same service. I am optimistic about the reception that we might receive from the General Assembly. Later today Andrew will discuss management policies regarding conflicts of interest, personal trading and other topics concerning internal ethics and ethical conduct. I am pleased with Compliance’s work to reduce our practices into written policies. Reducing present practices to writing in no way suggests that any conduct other than strictly ethical conduct now occurs here at RSIC. I will leave you with an invitation to look for a draft strategic plan for RSIC that will be coming to you soon via
email. I hope that the chairman will want to discuss it at the February meeting. We ask for your thoughts and comments prior to that time. Thank you
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