Across the nation, public employee pension funds typically spend significant sums for their trustees to attend conferences and seminars to keep up with the latest investment strategies and trends.
Despite this, the Los Angeles County Employees Retirement Assn. is an outlier — and drawing increased scrutiny because of it.
The trustees of the massive trust fund, commonly known as LACERA, have taken hundreds of trips across the country and overseas in recent years, excursions that have cost the fund more than $1.3 million since 2015, according to a Times review of internal documents.
The trips — to faraway locales such as Abu Dhabi, Tokyo, Hong Kong and Paris, among others — have raised questions internally and externally, and have drawn the attention of the county’s Board of Supervisors.
One member of the board, Supervisor Hilda Solis, recently called for county and state auditors to scrutinize LACERA’s books — a sweeping and extraordinary request her colleagues could endorse at their meeting Tuesday.
“This is a necessary step,” she said in an emailed statement, “to safeguard the commitment the county has made to its past, current and future employees.”
The scrutiny of LACERA has grown more intense in recent weeks, prompted by the June 7 firing of Chief Executive Lou Lazatin. Her unexplained ouster prompted criticism from the supervisors, as well as members of SEIU Local 721, which represents county workers.
Lazatin was fired by a joint session of LACERA’s two governing panels — the Board of Investments and the Board of Retirement. The nine-member boards safeguard the retirement fund and set investment policy for more than 100,000 county employees — jobs that take them to educational and industry events, with some members opting for more travel than others.
LACERA’s own auditors have raised red flags about the scale of the travel and controls for it, while noting that the trustees’ trips were properly approved and largely obeyed policy.
A recent audit noted that travel costs make LACERA a “significant outlier” among peer funds across the country, including some with much larger operations, such as those for state employees and school teachers. In fiscal year 2018, for example, LACERA spent $400,000 on education travel for its board members — three times as much as the California Public Employees’ Retirement System, or CalPERS.
Among the concerns, according to the audit, was a board member who extended a LACERA trip with several personal days, but paid for lodging with a credit card tied to the pension fund.
Another trustee requested and was approved for a reimbursement of $400 for a pair of lost prescription sunglasses on a trip. Still others spent more on rooms or meals than expected.
To examine LACERA’s travel spending, The Times reviewed more than 1,300 pages of trip brochures, travel logs and expense vouchers for trips released under California’s Public Records Act, and then compiled them into a database. The resulting data include records for some 440 trips between the summer of 2015 and March of this year.
Among the findings:
- At least 25 trustees — some of whom have since left and been replaced — filed travel expenses. The average per-trustee spending was about $53,000.
- Some trustees spent as little as $3,000 during the three-year period. Others exceeded $100,000. Some traveled as many as 10 times a year.
- Travel included industry conferences and networking functions in 80 cities. About half of the trips were to destinations in California, but many required flights to and lodging in Washington, D.C., New York and Las Vegas.
- About 20 destinations were overseas — in China, Australia, Italy and Israel and other countries — at an overall cost of $450,000.
- One trustee, Herman Santos, a county public defender who serves on both boards, attended nearly 50 functions at a cost of $219,000.
- Business-class airfare on some trips overseas cost more than $12,000.
In defending the travel, LACERA officials say the pension industry is complex and therefore requires trustees to be educated on investments, benefits, healthcare, finance and fund management. LACERA pays $3 billion annually to retirees.
“Education is useful and has great value to the organization in helping the trustees make decisions on behalf of the members, whose retirements depend on the boards’ actions,” Steven Rice, LACERA’S chief counsel and acting chief executive, said in a written statement.
Rice said the travel policy, which trustees could soon revise amid the scrutiny, offers a framework for reimbursing members who travel on LACERA business. More broadly, the policy safeguards the boards and the organization from ethical concerns, avoiding the prospect of trips funded by groups or companies that might benefit from LACERA.
LACERA is a public entity, but its travel charges are paid with earnings from the fund, not tax money, in accordance with state law.
Still, internal auditors, county officials and even some board members say the custom of frequent trips to faraway destinations raises fair questions about why travel budgets steadily increase.
The planned spending for this fiscal year, for example, is $569,000 — an increase of 38% from two years ago. Such spending, the auditors said, made LACERA unique in the industry.
Auditors also found holes in the expense controls. Trustees were found to upgrade rooms without approval or to spend more than expected on meals. Also there was evidence of missing receipts and instances in which employees who assisted board members didn’t strictly adhere to the travel policy rules.
In both private and public interviews, members said they were aware of the concerns about travel expenses — worries that were weighed during a meeting Friday at LACERA’s Pasadena headquarters.
The Times contacted each board member to inquire about travel spending. Many declined, citing a directive by Rice to have him serve as spokesman.
At the meeting Friday, several LACERA members appeared open to making significant changes to the travel policy, including putting stricter caps on the number of trips and posting their expense reports online.
Any changes resulting from recommendations in the audit would have to be considered by the full LACERA boards before they take effect, perhaps next month, Rice said.
Alan Bernstein, a real estate investor from Hancock Park who chairs the Board of Retirement, led the meeting. Since 2015, his travel expenses alone have totaled $97,000. One of his trips, to an executive education program on investment strategies and portfolio management, cost more than $10,000 just for registration.
“I am personally open to questioning the amount of travel, although I am very supportive of the need for travel,” Bernstein said in an earlier interview.
Such costs might seem extraordinary to some, but they are the price of entry to a specialized ecosystem that caters to institutional investors — including public pension funds — whose organizations have deep pockets.
Some of the events require just a half-day seminar somewhere in the county, and others might involve a weekend in Indian Wells. Still others have taken members across the globe, including to India, where two members attended an event that featured a meeting with Prime Minister Narendra Modi.
“It adds a layer of information and intelligence that they wouldn’t otherwise get,” said Lionel Johnson of the Pacific Pension & Investment Institute, a nonprofit that hosts such events across Asia, including the one with Modi. “They would still basically be making decisions about markets with only part of the picture being given to them.”
Lt. Shawn Kehoe, a Sheriff’s Department investigator elected as trustee to the investments board, made a trip to New Delhi with the pension institute. It was among $135,000 in travel expenses he accumulated during the period examined by The Times, including a $22,000 trip with the same group last year to Sydney.
In an interview, Kehoe disputed that LACERA’s costs should be considered excessive — even when compared with peer organizations — but has proposed substantially reducing the number of conferences, including those outside the country.
“The focus should be education and engagement and not simply travel, which is a necessary element of education,” he said. “Discussing travel alone does not tell the whole story.”
Other board members who topped the travel spending list were Vivian Gray, an attorney in the county’s Alternate Public Defender’s Office, and David Green, a social worker in the Department of Children and Family Services. Their trips totaled about $115,000 and $120,000, respectively, during the time period.
Another board member, Les Robbins, a retired sheriff’s deputy, has taken only one trip since 2016 — a three-day, $4,000 journey to Washington, D.C., for the annual conference held by America’s Health Insurance Plans, an industry trade and lobbying group.
Robbins, a LACERA veteran, said he believes less experienced members get more from the programs. He also said he understands the scrutiny and expects internal efforts to address it — even though he believes the association has a “relatively tight” policy already.
The costs might be harder to change, he said.
“The board is probably going to take a look at the travel policy and perhaps make some changes,” he said. “But we have board members who like to travel.”