I hope everyone has had a chance to read the latest news out of PSPRS world. If not, you are going to love these two new stories by Craig Harris of the Arizona Republic:
State recommends PSPRS administrator Smout be fired for sexual harassment
PSPRS delays decision on Administrator Jared Smout after sexual harassment investigation
It turns out that Jared Smout, the arrogant, ethically-challenged, and incompetent soon-to-be ex-PSPRS Administrator is also a voyeur and sexual harasser, who spent over a year harassing another PSPRS employee and hours watching live workplace surveillance videos of another (or maybe the same?) PSPRS employee. As we have discussed multiple times here, Mr. Smout should have been forced to resign years ago, at the same time as former Administrator James Hacking, as he also signed off on the illegal raises that cost Mr. Hacking his job. Somehow, though, he has remained at PSPRS and was promoted to Administrator. Today should be his last day at PSPRS, as the PSPRS Board of Trustees is meeting today to terminate him.
While it is easy to focus on the weird, disturbing behavior of Mr. Smout, we should not let it distract us from the bigger picture. PSPRS is an extremely dysfunctional organization. A toothless Board of Trustees made up of clueless cheerleaders like longtime former Chairman Brian Tobin or current Chairman Will Buvidas obviously has no control over PSPRS' management. While they have vociferously sung the praises of Mr. Smout and former Chief Investment Officer Ryan Parham despite years of management issues and poor financial results, they now sheepishly profess their complete ignorance of this latest PSPRS fiasco.
PSPRS is crying our for some type of radical overhaul following a more broad-ranging investigation into PSPRS structure, culture, and internal controls. Here are some of the questions I have:
1. What did no one on the Board of Trustees have any idea what was going on? The Board acts as just a rubber stamp of PSPRS with oversight only in name. Obviously, none of the victim(s) of Mr. Smout's actions felt comfortable going to the Board. Why? One can only assume that they believed that Board would not do anything. This is especially damning as the current makeup of the Board includes two law enforcement members and four public safety members in total. As it always has in the past, the Board works for PSPRS' management, not the other way around. The Board neither knows or understands what PSPRS is doing and simply parrots what management tells them. It's no wonder employees would not trust Board members with a sensitive matter.
2. Why does PSPRS need an internal video security system that is capable of real-time surveillance of employees, and why would the Administrator have access to it? PSPRS is not a casino, and as far as I know, there is no cash, precious metals, or diamonds being handled there, like in a bank or a coin or jewelry store. I guess in an office setting like PSPRS it would be a deterrent to anyone planning on stealing a stapler or a pad of Post-Its. More likely, it would be an effective way to intimidate employees, especially if they thought their supervisor(s) were capable of watching them at any time. Why would the Board allow a system like this to even exist?
3. Who among PSPRS management knew about Mr. Smout's behavior and what did they do about it? This is the most important question. According to the articles, Mr. Hacking knew about Mr. Smout watching videos of the employee but did nothing about it. It is not clear who gave the evidence of Mr. Smout's surveillance to Mr. Hacking, but obviously at least one other person knew of it. But who else knew? Mr. Tobin denies any knowledge of it. As for the more recent sexual harassment, there is no information about who did or did not know of Mr. Smout's behavior. Hopefully, we will find out more later.
Of course, this gives a new perspective on the retroactive bonuses paid out last year. These were initially approved by Mr. Smout without the Board's consideration or approval. Remember that these were classified as legal claims against PSPRS as a way to hide the payment of retroactive bonuses. This certainly seems fishy in light of everything we know now. Once again, we can only hope we find out more later.
4. Who will replace Mr. Smout? I suspect that anyone will be better than Mr. Smout. However, PSPRS is in desperate need of an outsider to clean it up. It is the only way to effectively change the culture and put in place the necessary checks and balance so that no one like Mr. Smout ever becomes head of PSPRS again.
5. How much is this going to cost PSPRS (i.e. taxpayers)? Lawsuits are coming.
Until a full accounting is complete, there are few things that can be immediately done:
1. Give the Arizona State Retirement System (ASRS) control of PSPRS' investment portfolio. How can PSPRS' management be trusted with $10 billion and the retirements of thousands of PSPRS members? While I would like to see this be a permanent change, it in necessary in the interim until some stability and a level of professionalism is restored in PSPRS' management.
2. Remove Chairman Will Buvidas from the Board, or at least remove him from the Charimanship. He has proven that he is not up for the job, and having served as Vice-Chairman under former Chairman Brian Tobin, he is ill-prepared to provide oversight of PSPRS going forward. A non-public safety member would probably be better suited for the chairmanship in light of Mssrs. Tobin and Buvidas' tenures.
3. Fire PSPRS communications director Christian Palmer. A smarmy, petulant man temperamentally unsuited as a spokesman for PSPRS, Mr. Palmer is an embarrassment to PSPRS and will hinder efforts to reform it.
It will be interesting to see where this all ends. Stay tuned.
Information and analysis of the Arizona Public Safety Personnel Retirement System (PSPRS) and issues that affect public defined benefit pensions.
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Love this blog. Thank you so much for trying to raise issues with PSPRS. I agree with you article completely.
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