D.A. Investigating Demoted Pension Board Chief

The district attorney’s office is investigating allegations that the demoted administrator of the Orange County Retirement System abused her authority by forcing employees to run personal errands, pension board officials said Friday.

Harley Bjelland, an attorney for the board, acknowledged that prosecutors requested copies of an internal investigation into charges made against Mary-Jean Hackwood. The board, which manages the investments of more than 20,000 current and retired government workers, demoted Hackwood last week. She has denied any wrongdoing.

“There is no intention to protect or hide anything. The board is giving its full and complete cooperation,” Bjelland said. “We feel it’s important to make sure the district attorney is comfortable about what we are doing.”

The probe comes as some county officials press the pension board to implement reforms similar to those adopted by the Board of Supervisors in connection with the county bankruptcy and a 1993 influence-peddling case involving former Supervisor Don R. Roth.

Some supervisors and activists want the pension system to follow the county’s lead by prohibiting its employees and board members from accepting gifts from companies that do business with the board.

The county enacted its gift ban after Roth pleaded guilty to misdemeanor charges of accepting gifts from individuals who did business with the county.

Other officials suggested that the pension board consider some of the tight investment oversight policies the county has adopted in recent months.

Under state law, the retirement system is a separate entity from the county and invests its funds independently. Though the Board of Supervisors appoints four of the nine pension board members, it cannot remove appointees at will.

Hackwood and other pension system officials receive thousands of dollars a year in free meals, concert tickets, golf games and other gifts from investment companies, according to pension system records. Some critics contend the gifts create the appearance of a conflict of interest.

County supervisors have also questioned the board’s plan to spend $5 million on a new headquarters in Irvine, which backers said is a sound, long-term investment. But others doubt the need for a brand-new office when there is plenty of vacant office space throughout the county.

“I’m not sure they’ve gotten the message of the bankruptcy,” Supervisor William G. Steiner said. “The lessons we learned from the bankruptcy should be a wake-up call to the [pension] board.”

The criticism, coupled with the Hackwood case, have focused an unusual level of scrutiny on the low-key pension board, which controls a $2.9-billion retirement fund.

The controversy began in December when employees accused Hackwood of charging personal phone calls to the county and requiring workers to water her plants and shuttle her to the airport for personal trips. They also said she ordered them to run personal errands, such as picking up her mail from home when she was out of town.

The board placed Hackwood on administrative leave and hired a lawyer to investigate the allegations. Last week, board members demoted Hackwood to portfolio manager and said they would rent a separate office for her to reduce her contact with other employees.

The district attorney’s office has sought documents related to the board’s confidential investigation. Prosecutors could not be reached for comment Friday, but Bjelland said their focus appeared to be on allegations that Hackwood misused staff and equipment.

Hackwood’s attorney, Cameron Smith, said his client has been falsely accused. The internal investigation, he said, showed a serious morale problem at the retirement system but did not indicate any abuse or wrongdoing.

“In terms of criminal violations and cheating the system, it doesn’t show that. As far as I’m concerned, it’s over and done with,” Smith said. “I don’t believe the district attorney or anyone else who investigates Mary-Jean will find anything they would want to prosecute.”

Bjelland said the board welcomed the probe and expressed hope that its conclusion will allow the system to “move on with life.”

But concerns about the retirement system extend beyond the Hackwood case.

Some county officials said they remain uneasy about the hundreds of meals and gifts board members and top administrators receive from companies doing business with them.

A state law allows officials to receive up to $250 annually in gifts from each investment advisor. If officials exceed that level, they must abstain from voting or influencing decisions involving the company that provided the gifts.

Gift records from 1993-94 showed that Hackwood, her deputy and at least two board members exceeded the $250 limit. But officials said they did not take any action on items involving the gift-givers.

For example, Board Chairman Thomas Lightvoet and acting administrator Terry Slattery each received from the Boston Co. investment firm a $562 ticket for a 1994 celebrity golf tournament, according to the records. But the company had no business before the board that year, Lightvoet and Slattery said.

Both officials insisted that the retirement system benefits from having officials meet with investment advisors in an informal setting.

“Investing is definitely a people business where you are trusting your assets to individuals,” Slattery said. “We need to know the individuals directly involved in the running of the portfolio.”

But Lightvoet said the board has given thought to enacting some sort of gift ban.

County Treasurer-Tax Collector John M.W. Moorlach, who serves on the retirement board, said he is “uncomfortable about the perception” created when officials take gifts. Instead of accepting invitations to fancy dinners with advisors, Moorlach said he simply schedules meetings with them in his office.

Supervisor Don Saltarelli has suggested creating a liaison who can monitor the system and relay the county’s position on reforms and other issues to board members.

“Even though we don’t have the power to make decisions, there is no reason we can’t express our views about the way the [system] is operated and how public funds are spent,” Saltarelli said. “I think we would be taking a proactive position by expressing our opinions.”