Oklahoma Attorney General Scott Pruitt announced Thursday he is launching an investigation into how various financial institutions are handling state pension investments.
Pruitt said he sent letters to several custodial banks seeking information on investment transactions, particularly those involving foreign currency exchanges. He says similar investigations have been launched in California, Virginia and Florida as part of an effort to recover more than $200 million in state pension funds.
“This is not something we’re doing on a whim. It’s not something we’re doing blind,” Pruitt said. “We’re doing it because we’ve been informed to a degree that we believe it’s something we need to pay attention to and look into. What it leads to is unknown. It may not lead to anything.”
Pruitt declined to say who notified his office of possible fraud or exactly who was being investigated.
He said state pension funds generally have about 20 percent of its portfolio invested internationally, and Pruitt said his probe will focus on how those international investments are handled.
The assets of Oklahoma’s major public pension systems total about $21.4 billion, according to the state Pension Commission.
The directors of the state’s two largest pension funds — the Oklahoma Teachers Retirement System and the Oklahoma Public Employees Retirement System — both said Thursday they were not aware Pruitt was launching an investigation.
“At this point, I don’t think I have enough information to make any kind of comment,” said OTRS Director James Wilbanks, who said he welcomed the probe.
OTRS is the state’s largest pension system, with more than $10 billion in assets. OPERS’ assets total about $6.8 billion, said Director Tom Spencer.
Actuarial studies have determined Oklahoma’s pension systems have a $16.5 billion unfunded liability, which is the amount owed to pensioners beyond what the systems can afford to pay.
By far the largest component of the state’s unfunded liability is OTRS, with an unfunded liability of $10.4 billion.
Republican lawmakers made overhauling the state’s pension system one of their top priorities last year, and House Speaker Kris Steele has appointed a House Oversight Committee on Pensions to explore further changes to the system. During the last legislative session, the Legislature approved a bill to eliminate the practice of granting automatic 2 percent cost-of-living adjustments every two years to retirees. That bill is expected to immediately decrease the unfunded liability of the state’s public pension systems by more than $5 billion.
State Rep. Randy McDaniel, the chairman of the House committee, said among the items lawmakers will examine is whether Oklahoma’s pension systems investments are being handled properly.
“We will look at everything from pension investment policies and procedures to the performance of our outside money managers,” said McDaniel, R-Oklahoma City.