FRANKFORT — Middlemen known as "placement agents" who do business with the Kentucky Retirement Systems would have to register as lobbyists and follow state ethics laws under a bill that a House panel unanimously approved Thursday.
House Bill 300, sponsored by Rep. Mike Cherry, D-Princeton, also would limit trustees of the KRS to three four-year terms, place the Kentucky Teachers' Retirement System board under the state ethics code, and would require the state auditor to audit the Judicial Form Retirement System for judges and legislators at least once every five years.
Cherry said the bill is designed to address concerns raised in an audit of the state pension system last year by then-state Auditor Crit Luallen.
Luallen told the committee last year that she identified no misuse of KRS money related to placement agents, who help private investment companies sell their products. But Luallen said one agent in particular, Glen Sergeon of New York, enjoyed close access to KRS and made nearly $6 million in fees through his relationship with Adam Tosh, then chief investment officer for KRS.
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Tosh resigned in 2010 after being questioned about Sergeon in an internal audit at KRS.
"Our audit found that use of placement agents lacked transparency and may not have been in the best interests of the retirement systems," Luallen told lawmakers.
Last year, Cherry's bill would have banned state payments to placement agents. He said various parties involved in the legislation think it is better to put them under the state ethics code.
Cherry said the Executive Branch Ethics Commission supports the proposal to require placement agents to register as lobbyists.
The bill defines placement agents as any person or firm hired or compensated by an employer to influence investments of the Kentucky Retirement System or the Kentucky Teachers' Retirement System.
Lobbyists, Cherry said, have to make regular, public reports about their salaries and expenses.
"I think this will provide transparency," said Cherry, who chairs the House State Government Committee.
The panel unanimously approved the measure with little discussion and sent it to the full House for its consideration.
Cherry said he expects the House to approve it and that its chances in the Senate are much better this year. Last year, the Senate initially approved Cherry's bill, but the Senate later added other measures to it late in the session, dooming the proposal.