Lawyers, KRS and Money

When looking at the staffing for the Kentucky Retirement Systems there was an increase in the number of lawyers on the payroll. Now it must take a bunch of legal help to run KRS.

In addition to the lawyers on the payroll KRS spent, according to the 2006 Comprehensive Annual Report (CAFR) Schedule of Professional Consultant Fees, a total of $522,000.00 for legal services. The cost of legal fees is up over $100,000.00 from the previous year's $397,000.00.

I guess the more you spend for lawyers the less you have to spend on Auditors. The CAFR showed the cost of Audit Services dropped from $41,000.00 to $23,000.00.

So who are the law firms making over a half million dollars from retired state employees and taxpayers?

According to the CAFR, the legal consultants listed are Klausner & Kaufman, PA and Stoll, Kennon & Park, LLP which is now Stoll Kennon & Ogden.

Klausner & Kaufman

The picture painted of Klausner & Kaufman is not pretty.

According to Forbes, Klausner receives a varying cut of lawyer fees for work on cases he refers to class action firms, on top of a retainer for routine work. One client the Jacksonville Police and Fire Fund trustees seemed largely unaware of Klausner's arrangement.

Klausner also played a role in the controversy surrounding the San Diego pension system. From the San Diego Reader:

'Someday this mess will end up in the media," wrote an irate Terri Webster in an e-mail on August 13, 1999. Oh, how prescient her words were. Webster, then assistant city auditor, was writing to deputy city manager Bruce Herring…..

She particularly challenged the hiring of Robert D. Klausner, the Florida lawyer who was not licensed in California. "You would think question #1 in selecting candidates for the board to interview would be, 'Are you licensed to practice in the state?'" wrote Webster to Herring. She questioned Klausner's past advice: "He's the guy from Florida that mostly supported the questionable issues without citing much case law. He gave the advice on independence, Brown Act, conflicts of interest, etc. He's been employed with the board for over two years. Reassuring, isn't it? The board should contact his other California clients to save them $$$ for bum advice."

Klausner’s “client conferences” also get mentioned in this article by Gretchen Morgenson and Mary Williams Walsh, of the New York Times

Pension consultants aren't the only ones holding conferences where money managers can hobnob with pension officials. Robert D. Klausner, a lawyer at Klausner & Kaufman in Plantation, Fla., whose firm provides legal counsel to many pension funds in Florida and elsewhere in the south, runs similar meetings.

Klausner & Kaufman's sixth annual client conference was in March at the Hyatt Regency in Fort Lauderdale, Fla. Among the eight companies that paid to sponsor the 2003 conference were Merrill Lynch and Davis Hamilton Jackson & Associates, a money manager based in Houston that Merrill often recommends to its pension clients.

Stoll Kennon & Ogden

The managing partner of Stoll, Kennon & Ogden is former State Representative Bill Lear. You would think that with Lear’s reputation for land dealings and economic development KRS management would have used some of those fees to consult him on their real estate dealings:

“In the area of economic development, Mr. Lear has extensive state, national and international experience and is one of Kentucky's foremost attorneys.”

Other law firms

The law firm of Ice Miller is listed as a Fiduciary Consultant and the firm of Lussler, Gregor, Vienna and Associates isn’t listed at all.

That’s a lot of high powered legal talent. As a comparison all Professional Services Contracts (legal, audit, etc.) at Kentucky Teachers Retirement System cost a total of $229,833.

So today’s questions are:

Why do you pay over half a million dollars in legal fees when you have a stable of lawyers in house?

Does the $522,000.00 for legal services cover all the lawyer’s fees or just those to Klausner and Stoll Kennon?

Why does the Kentucky Retirement System need a Washington DC lobbying firm?

Is part of the $2 million dollars in salaries and per diem spent on junkets to Florida for “client conferences”?

Why is Ice Miller listed as a Fiduciary Consultant in the CAFR and not legal consultant? Is there are real difference in the service they provide or is this just a way to hide more legal fees?

And once more,

Where are the watch dogs on this agency?