As reported in NJ.Com, The Boards of Trustees of New Jersey’s largest pension funds plan to launch a probe into how the state awards fees incurred in managing pension fund investments.  The Public Employees Retirement System Board of Trustees voted to conduct a forensic audit of the fund’s expenses, following a similar vote by the trustees of the Police and Firemen’s Retirement System.  Fees and bonuses for the pension fund’s investments hit a high last year as the State spent roughly $265 million on management fees and expenses and $335 million on performance bonuses.  Wayne Hall, chairman of the PFRS Board of Trustees is asking “Why are we paying that kind of money?” “When I see the exorbitant fees the state has been paying for the last couple of years, I have to question that.”  A spokesman for the Department of Treasury declined to comment.

While the state paid $265 million in fees to private credit fund managers and income advisers, the Division of Investment’s own operations, which manage three quarters of the pension assets, charged $10.6 million in management fees.  In 2013, the state reported less than $400 million in fees and expenses and $25 million in commissions. Trustees said they were concerned with the rising costs and changes in terminology for fees and bonuses.

“We can’t compare apples to apples unless we know we’re looking at apples,” PERS Chairman Tom Bruno said Wednesday. “And I think it might be deliberate.”  Hall stated, “I’m a layman. I’m not on Wall Street. I’m not an investor, and I have 33,000 people that I answer to and they’re not investors either.”  “I basically need it in English.”

Five years ago, the state began increasing its stake in non-traditional, or alternative, investments such as private equities and real estate. The share of investments the state has in hedge funds has tripled to 12 percent in the past five years, and real estate and private equity have nearly doubled to 5.3 percent and 9.3 percent, respectively.  With 770,000 active and retired employees, the fund doles out $650 million to $700 million a month to pay for pensions and benefits. It is among the largest public pension funds in the U.S and one of the worst-funded.

State investment officials have said the shift out of fixed-income securities and into alternatives has paid off.  In the fiscal year that began July 1, 2013, and ended halfway through last year, the pension investments earned 16.9 percent.  Members of the State Investment Council that oversees the fund and state officials have defended the fees, which they say beat industry

“I know there’s some distrust of the fees we pay these people,” Tom Byrne, chairman of the State Investment Council, has said. “But just by putting smart managers in some places you can add a lot of value… We have been producing returns well ahead of what was established, and the investment results have made the pension fund billions healthier.”  Treasurer Andrew Sidamon-Eristoff told the Assembly Budget Committee in March that the investment division merely expanded its reporting to include those sweeteners, saying that should be recognized as “enhanced transparency and not an opportunity to distort facts.”

Given this administration’s “track record” it will be interesting to see the results of this investigations.

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Photo of Frank M. Crivelli Frank M. Crivelli

Frank M. Crivelli’s practice revolves around the representation of over eighty-five (85) labor unions in various capacities, the majority of which bargain for law enforcement entities. He is proud to be called on a daily basis to provide counsel to over 12,000 state…

Frank M. Crivelli’s practice revolves around the representation of over eighty-five (85) labor unions in various capacities, the majority of which bargain for law enforcement entities. He is proud to be called on a daily basis to provide counsel to over 12,000 state, county and local law enforcement officers, firefighters and EMS workers.

Mr. Crivelli specializes his individual practice in collective negotiations.  Over the past twenty (20) years, Mr. Crivelli has negotiated well over one hundred (100) collective bargaining agreements for various state, county, municipal and private organizations and has resolved over thirty-five (35) labor agreements that have reached impasse through compulsory interest arbitration.  Mr. Crivelli routinely litigates matters in front of the New Jersey State Public Employment Relations Commission, the New Jersey Office of Administrative Law, third party neutrals for mediation, grievance and interest arbitration, the Superior Court of New Jersey and the United States District Court for the District of New Jersey.

Mr. Crivelli founded and created the New Jersey Public Safety Officers Law Blog ( approximately fifteen (15) years ago where he and members of his firm routinely publish blog posts regarding legal issues related to the employment of New Jersey Public Safety Officers.  The blog now contains over six hundred (600) articles and is reviewed and relied upon by thousands of public employees.  Mr. Crivelli has also published books and manuals pertaining to New Jersey Public Employee Disability Pension Appeals and the New Jersey Worker’s Compensation System. Currently, he is drafting a publication on how to Prepare and Negotiate a Collective Bargaining Agreement.  He lectures annually at the New Jersey State PBA Collective Bargaining Seminar, the National Association of Police Organization’s Legal Seminar, the New Jersey Public Employment Relations Commission Seminar on Public Employment Labor Law, the United States Marine Corps’ Commander’s Media Training Symposium and to Union Executive Boards and General Membership bodies on various labor related topics.

Prior to entering private practice, Mr. Crivelli joined the United States Marine Corps where he served as a Judge Advocate with the Legal Services Support Section of the First Force Services Support Group in Camp Pendleton, California.  While serving in the Marine Corps, Mr. Crivelli defended and prosecuted hundreds of Special and General Court Martial cases and administrative separation matters.  In addition to his trial duties, Mr. Crivelli was also charged with the responsibility of training various Marine and Naval combat command elements on the interpretation and implementation of the rules of engagement for various military conflicts that were ongoing throughout the world at that time. After leaving active duty, Mr. Crivelli remained in the Marine Corps Reserves where he was promoted to the rank of Major before leaving the service.

For the past fifteen (15) years, Mr. Crivelli has been certified as a Civil Trial Attorney by the Supreme Court for the State of New Jersey, a certification which less than two percent (2%) of the attorneys in New Jersey have achieved.  He is a graduate of Washington College (B.A.), the City University of New York School of Law (J.D.), the United States Naval Justice School, and the Harvard Law School Program on Negotiation.