MEETING NUMBER 2871 JOURNAL OF PROCEEDINGS OF THE BOARD OF TRUSTEES OF THE POLICE AND FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT

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1 MEETING NUMBER 2871 PRESENT JOURNAL OF PROCEEDINGS OF THE BOARD OF TRUSTEES OF THE POLICE AND FIRE RETIREMENT SYSTEM OF THE CITY OF DETROIT PROCEEDINGS HELD THURSDAY, JANUARY 5, :00 A.M. IN THE CONFERENCE ROOM OF THE RETIREMENT SYSTEMS 910 COLEMAN A. YOUNG MUNICIPAL CENTER DETROIT, MICHIGAN Janice Butler Mark Diaz James Edwards Matthew Gnatek Brenda Jones James Moore Sean P. Neary George Orzech Jeffrey Pegg Walter Stampor Cynthia A. Thomas Ryan C. Bigelow Janet S. Lenear Ronald Zajac Joe Turner Ex/Officio Trustee Elected Trustee Ex/Officio Trustee Elected Trustee/Vice Chairman Ex/Officio Trustee/Council Member Elected Trustee Elected Trustee/Chairman Elected Trustee Elected Trustee Executive Secretary Assistant Executive Secretary Investment Analyst Recording Secretary Legal Counsel Special Legal Counsel EXCUSED Fred D. Wheeler Ex/Officio Trustee ABSENT Cheryl R. Johnson Joseph Martinico Ex/Officio Trustee/Treasurer Ex/Officio Trustee/Labor Relations Director

2 2 CHAIRPERSON Sean P. Neary VICE CHAIRPERSON Matthew Gnatek ROLL CALL WAS TAKEN AT 9:10 A.M. BY THE BOARD S RECORDING SECRETARY AND THE MEETING WAS CALLED TO ORDER. DROP RETIREMENTS BY TRUSTEE DIAZ SUPPORTED BY TRUSTEE GNATEK RESOLVED, THAT THE DROP APPLICATIONS WHICH ARE OUTLINED BELOW BE APPROVED: DROP RETIREMENTS LEONARD BARSZCZ OFFICER - P SERVICE CR./EFFECTIVE DATE: LUVENIA BRYANT OFFICER - P SERVICE CR./EFFECTIVE DATE: PAULA GAMBRELL-DAY - SERGEANT - P SERVICE CR./EFFECTIVE DATE: LARRY GASSEL BATTALION FIRE CHIEF - F SERVICE CR./EFFECTIVE DATE: JAMES HOWELL OFFICER - P SERVICE CR./EFFECTIVE DATE: RICHARD JANES LIEUTENANT - F SERVICE CR./EFFECTIVE DATE:

3 3 CONTINUATION OF DROP RETIREMENTS MARK O LEARY OFFICER - P SERVICE CR./EFFECTIVE DATE: JOYCE STOLL BATTALION FIRE CHIEF - F SERVICE CR./EFFECTIVE DATE: YEAS TRUSTEES BUTLER, DIAZ, EDWARDS, GNATEK, MOORE, ORZECH, PEGG AND CHAIRMAN NEARY 8 SERVICE RETIREMENTS BY TRUSTEE GNATEK SUPPORTED BY TRUSTEE MOORE RESOLVED, THAT THE SERVICE RETIREMENT APPLICATIONS WHICH ARE DESIGNATED BELOW BE APPROVED: SERVICE RETIREMENTS DEBRA FAIR COMMANDER - PCOA SERVICE - NEW SERVICE CR./EFFECTIVE DATE: PATRICK O BRIEN SR. CHIEF - F SERVICE - NEW SERVICE CR./EFFECTIVE DATE: YEAS TRUSTEES BUTLER, DIAZ, EDWARDS, GNATEK, MOORE, ORZECH, PEGG AND CHAIRMAN NEARY 8 CONFIRMATIONS BY TRUSTEE PEGG SUPPORTED BY TRUSTEE GNATEK RESOLVED, THAT THE RECEIPTS AND DISBURSEMENTS WHICH ARE DESIGNATED ON THE PAGE WHICH FOLLOWS BE CONFIRMED:

4 4 RECEIPTS AND DISBURSEMENTS Meeting # 2871 January 5, 2012 The Police & Fire Retirement System of the City of Detroit CONFIRMATIONS For the Period to REMITTER / PAYEE NAME WIRE DATE DESCRIPTION AMOUNT RECEIPTS-BNY Longship Multi-Strategy Debt Fund 12/12/11 Remittance 1,050, Citigroup Venture Capital International 12/14/11 Remittance 54, Steward Real Estate Management 12/14/11 Remittance 39, US Real Estate 12/14/11 Remittance 38, MayfieldGentry Realty Advisor 12/16/11 Remittance 1,191, Perseuse Partners 12/16/11 Remittance 556, Alex Brown Realty-One Kennedy 12/16/11 Remittance 29, Alex Brown Realty-Beethoven Apt 12/16/11 Remittance 10, Alex Brown Realty-Union at Midtown 12/16/11 Remittance 44, SG Mortgage Fund-Lakeview 12/16/11 Remittance 6, SG Mortgage Fund-Tuscan 12/16/11 Remittance 36, SG Mortgage Fund-River Oaks 12/16/11 Remittance 59, Solitron 12/16/11 Remittance 5, Behringer Harvard 12/16/11 Remittance 8, Inland American Real Estate 12/16/11 Remittance 66, City of Detroit 12/16/11 Weekly Annuity Contribution 264, United States Power Fund 11 12/20/11 Remittance 223, City of Detroit 12/22/11 Weekly Annuity Contribution 91, Wind Point Partners 1V 12/22/11 Remittance 133, USPF Fund 111-Leveraged Feeder 12/22/11 Remittance 443, Alex Brown Realty-Lafer Building 12/22/11 Remittance 15, Capri Select Income 11 12/28/11 Remittance 264, SW Pelham Fund /28/11 Remittance 661, City of Detroit 12/28/11 6th Installment Pension Contribution 7,121, City of Detroit 12/29/11 Weekly Annuity Contribution 262, Washington Plaza 12/29/11 Remittance 250, USPF Fund 111-Leveraged Feeder 12/30/11 Remittance 213, Falconhead Capital Partners 12/30/11 Remittance 31, RECEIPTS-FINB Corzel Galloway 12/16/11 Annuity repayment 2, Abel Noser 12/22/11 Commission recapture 1, Daryl Sanders 12/22/11 Pop up option TOTAL RECEIPTS $ 13,179, DISBURSEMENTS-BNY DTIF-Alex Brown Realty-College Park MOB 12/12/11 Capital Call 4,200, First Independence Bank 12/14/11 Refund List # , First Independence Bank 12/14/11 Checkwrite 118, General Retirement 12/14/11 Staff Wages 27, Tailwind Capital Partners 12/19/11 Capital Call 322, MayfieldGentry Realty Advisor 12/19/11 Servicing fee, December, , Ronald Zajac 12/19/11 Retainer's fee, December, , North Point Advisors 12/19/11 Retainer's fee, December, , BlackEagle Partners Fund 12/20/11 Capital Call 831, The Life Assurance Fund-Loan 12/20/11 Capital Call 35, First Independence Bank 12/21/11 Checkwrite 64, First Independence Bank 12/21/11 Refund List #3431 1,359, First Independence Bank 12/27/11 Retired Payroll, December, direct deposits 20,877, Tailwind Capital Partners 12/28/11 Capital Call 819, The Superior Fund 12/30/11 Capital Call 350, TOTAL DISBURSEMENTS $ 29,938, YEAS TRUSTEES BUTLER, DIAZ, EDWARDS, GNATEK, MOORE, ORZECH, PEGG AND CHAIRMAN NEARY 8

5 5 CAPITAL CALLS, FEES AND EXPENSES BY TRUSTEE PEGG SUPPORTED BY TRUSTEE ORZECH WHEREAS, THE BOARD HAS BEEN PRESENTED WITH THE SUMMARY OF CAPITAL CALLS AND FEES AND EXPENSES WHICH IS REFERENCED BELOW, AND WHEREAS, THE BOARD HAS BEEN REQUESTED TO APPROVE FUNDING OF SAID CAPITAL CALLS AND PAYMENT OF SAID FEES AND EXPENSES, THEREFORE BE IT RESOLVED, THAT SUBJECT TO FINAL APPROVAL OF ALL TRANSACTION DOCUMENTS BY THE BOARD S LEGAL COUNSEL AND SUBJECT TO STAFF AUDIT, THE BOARD APPROVES FUNDING OF SAID CAPITAL CALLS AND PAYMENT OF SAID FEES AND EXPENSES: YEAS TRUSTEES BUTLER, DIAZ, EDWARDS, GNATEK, MOORE, ORZECH, PEGG AND CHAIRMAN NEARY 8

6 6 ASSISTANT EXECUTIVE SECRETARY S REPORTS ASSISTANT EXECUTIVE SECRETARY CYNTHIA A. THOMAS DISCUSSED VARIOUS MATTERS WITH THE BOARD, INCLUDING CERTAIN POLICE RETIREES BEING ERRONEOUSLY LISTED IN A NON-UNION MAILING (IT IS THE RESPONSIBILITY OF THE HUMAN RESOURCES DEPARTMENT TO CORRECT THE CODES TO ACCURATELY REFLECT THE UNION STATUS WHEN THEY RETIRED); THE RETIREMENT SYSTEM S GENERAL CONSULTANT RFP (WHICH WILL BE POSTED IN PENSIONS & INVESTMENTS, CRAINS AND ONLINE JANUARY 16, 2012) AND THE SYSTEM S 13 TH BOARD MEMBER COMMITTEE. MS. THOMAS ALSO PRESENTED EACH BOARD AND ADMINISTRATIVE STAFF MEMBER WITH A COPY OF MAYFIELD GENTRY S 2012 ANNUAL OPERATING BUDGET FOR MAYFIELD GENTRY S GENESIS VALUE FUND. LEGAL COUNSEL S REPORTS LEGAL COUNSEL RONALD ZAJAC DISCUSSED VARIOUS MATTERS WITH THE BOARD, INCLUDING THE STATE TREASURER S DECEMBER 21, 2011 REPORT TO GOVERNOR RICK SNYDER (HE PROVIDED THE BOARD WITH A COPY OF HIS DECEMBER 8, 2011 COMMUNICATION TO AUDITORS PLANTE MORAN AND A COPY OF A JANUARY 2, 2012 GENERAL RETIREMENT SYSTEM COMMUNICATION TO STATE TREASURER ANDY DILLON AND GOVERNOR RICK SNYDER REGARDING SAID DECEMBER 21, 2011 REPORT); THE CIAGLO LITIGATION (A MOTION FOR SUMMARY JUDGMENT WILL BE FILED); AND TRUSTEE JOHNSON S DECEMBER 9, 2010 MOTION THAT TRUSTEES BE ALLOWED TO VOTE VIA PHONE. State Treasurer Report to Governor Dated December 21, 2011 By Trustee Pegg Supported by Trustee Orzech WHEREAS, the State Treasurer has submitted a Preliminary Review Report (pursuant to P.A. 4 of 2011), consisting of 6 pages, dated December 21, 2011 which includes the following on page 6: There are questionable balances in the 2010 audit report of the City s pension plans. The auditors were unable to obtain sufficient evidence supporting approximately $216 Million of the Retirement Plans alternative investments, and WHEREAS, the June 30, 2011 audit information (and related reports) supersedes the June 30, 2011 information and, therefore, the June 30,

7 7 State Treasurer Report to Governor Dated December 21, 2011 (Continued) 2010 information is outdated and is not appropriately used by the State Treasurer regarding the preliminary review letter dated December 21, 2011, and WHEREAS, the aforesaid suggests that the Retirement Systems lack information regarding $216 million of alternative investments, and WHEREAS, it appears that the State Treasurer s comment was based on the June 10, 2010 audit and independent auditors review dated December 14, 2010 from Plante Moran which includes the following comment: We were unable to obtain sufficient audit evidence supporting approximately 113,000,000 of the Plan s alternative investments held at June 30, 2010 related mostly to private placement and real estate investments, and WHEREAS, the issue between the Police and Fire Retirement System and Plante Moran, the Retirement System s auditor, are complex fair market value issues which issues involve certain subjectivity, different methodology considerations, and accounting and auditing rules which were not resolved between the Retirement System and the auditor on June 30, 2010 (but were subsequently resolved regarding the June 30, 2011 audit), and WHEREAS, the Board of Trustees deems it appropriate to forward a letter to the State Governor and State Treasurer to respond to a possible misunderstanding by state officials/representatives, and WHEREAS, the Board has discussed this matter. THEREFORE BE IT RESOLVED, that the Chairperson of the Board of Trustees, on January 5, 2012, forward a letter to the Governor and State Treasurer after consultation with the Retirement System s Executive Secretary and General Counsel providing (1) a response to the above comment of the State Treasurer; and (2) clarification for the benefit of state officials and all concerned parties: YEAS TRUSTEES BUTLER, DIAZ, EDWARDS, GNATEK, MOORE, ORZECH, PEGG AND CHAIRMAN NEARY 8

8 8 TRUSTEE BRENDA JONES ENTERED THE MEETING GAT 9:48 A.M. SPECIAL LEGAL COUNSEL S REPORTS SPECIAL COUNSEL JOE TURNER DISCUSSED VARIOUS MATTERS WITH THE BOARD, INCLUDING: ADRIAN ANDERSON AND NORTH POINT ADVISORS, ET AL, VERSUS DEFENDANTS WATKINS AVIATION, LLC CIAGLO VERSUS PFRS, ET AL GRS/PFRS VERSUS ONYX CAPITAL ADVISORS, LLC, ET AL WOCHNA-HEAD LITIGATION BAB ASSOCIATES (CLARK HILL HAS VERIFIED PER INSURANCE CERTIFICATE - THAT BAB HAS PROFESSIONAL LIABILITY INSURANCE) CLARK HILL/WAYNE COUNTY RETIREMENT SYSTEM PLANTE MORAN MICHELLE WATTERWORTH AND ASSOCIATE MANJU PATNAIK DISCUSSED THE SYSTEM S JUNE 30, 2011 FINAL FINANCIAL REPORT (WITH SUPPLEMENTAL INFORMATION). CLOSED SESSION BY TRUSTEE MOORE SUPPORTED BY TRUSTEE GNATEK Resolved, That the Board enter into Closed Session for the purpose of discussing a certain Retirement System contractual employee and former Trustee Jeffrey Beasley: A Roll Call Vote was taken as follows: The Board entered into Closed Session at 11:32 A.M.

9 9 OPEN SESSION BY TRUSTEE JONES SUPPORTED BY TRUSTEE DIAZ Resolved, That the Board return to Open Session: A Roll Call Vote was taken as follows: The Board returned to Open Session at 11:55 A.M. RETIREMENT SYSTEM ACCOUNTANT VALERIE VAUGHN BY TRUSTEE ORZECH SUPPORTED BY TRUSTEE MOORE Whereas, the Board of Trustees have received a report regarding the employment of Valerie Vaughn, Retirement System Accountant, and have discussed the matter, therefore be it Resolved that based on the recommendation of administrative staff, Ms. Vaughn s employment with the Retirement System be terminated: DROP RETIREMENTS BY TRUSTEE GNATEK SUPPORTED BY TRUSTEE DIAZ RESOLVED, THAT THE DROP APPLICATIONS WHICH ARE DESIGNATED BELOW BE APPROVED: DROP RETIREMENTS GREGORY DUNN BATTALION FIRE CHIEF - F

10 10 CONTINUATION OF DROP RETIREMENTS SERVICE CR./EFFECTIVE DATE: LAWRENCE KUSHNER LIEUTENANT - F DROP NEW SERVICE CR./EFFECTIVE DATE: GEORGE ORZECH BATTALION FIRE CHIEF - F DROP NEW SERVICE CR./EFFECTIVE DATE: EDWARD VEDA SR. CHIEF - F SERVICE CR./EFFECTIVE DATE: MOORE, PEGG AND CHAIRMAN NEARY 8 ABSTAIN TRUSTEE ORZECH 1 VESTED RETIREMENTS BY TRUSTEE GNATEK SUPPORTED BY TRUSTEE DIAZ RESOLVED, THAT THE VESTED RETIREMENT APPLICATIONS WHICH ARE REFERENCED BELOW BE APPROVED: VESTED RETIREMENTS JACQUELINE GRUNDY SERGEANT - P VESTED PENSION - NEW SERVICE CR./EFFECTIVE DATE: PAUL THURMAN INVESTIGATOR - P VESTED PENSION - NEW SERVICE CR./EFFECTIVE DATE:

11 11 AUDIO RECORDING OF MEETINGS BY TRUSTEE PEGG SUPPORTED BY TRUSTEE GNATEK WHEREAS, THE POLICE AND FIRE RETIREMENT SYSTEM HAS PURCHASED AUDIO RECORDING EQUIPMENT TO AUDIO RECORD ITS MEETINGS, AND WHEREAS, THE GENERAL RETIREMENT SYSTEM ALSO WISHES TO AUDIO RECORD ITS MEETINGS, AND WHEREAS, THE GENERAL RETIREMENT SYSTEM WISHES TO USE POLICE AND FIRE S AUDIO EQUIPMENT TO AUDIO RECORD ITS MEETINGS AND IS WILLING TO PAY HALF THE COST PAID BY THE POLICE AND FIRE RETIREMENT SYSTEM TO PURCHASE SAID EQUIPMENT, AND WHEREAS, THE BOARD HAS DISCUSSED THIS MATTER, THEREFORE BE IT RESOLVED, THAT THE GENERAL RETIREMENT SYSTEM PAY ONE-HALF THE COST PAID BY THE POLICE AND FIRE RETIREMENT SYSTEM REGARDING THE AUDIO EQUIPMENT AND, AS CO-OWNER OF SAID EQUIPMENT, USE SAME FOR AUDIO RECORDING GENERAL RETIREMENT SYSTEM MEETINGS, AND BE IT FURTHER RESOLVED, THAT A COPY OF THIS RESOLUTION BE FORWARDED TO THE GENERAL RETIREMENT SYSTEM, AND BE IT FURTHER RESOLVED, THAT THE POLICE AND FIRE RETIREMENT SYSTEM RETAIN A COPY OF THIS RESOLUTION FOR ITS FILES:

12 12 RESOLVED, DEAN BUDZ PENSION NUMBER BY TRUSTEE GNATEK SUPPORTED BY TRUSTEE PEGG Whereas, Dean Budz has applied to this Board for Pre-Employment Military Service Credit and has complied with all of the necessary requirements of Section b of the Charter Provisions, as amended by Board resolution of February 3, 1983, Therefore Be It Resolved, That payment of the full amounts be made to the Pension Accumulation Fund by the method selected by Mr. Budz and the number of months eligible active duty be credited him as membership service credit subject to the conditions and limitations of the authorizing ordinance provisions as amended by Board resolution of February 3, 1983: WILLIAM PETERSEN PENSION NUMBER BY TRUSTEE GNATEK SUPPORTED BY TRUSTEE PEGG Whereas, William Petersen has applied to this Board for Pre-Employment Military Service Credit and has complied with all of the necessary requirements of Section b of the Charter Provisions, as amended by Board resolution of February 3, 1983, Therefore Be It Resolved, That payment of the full amounts be made to the Pension Accumulation Fund by the method selected by Mr. Peterson and the number of months eligible active duty be credited him as membership service credit subject to the conditions and limitations of the authorizing ordinance provisions as amended by Board resolution of February 3, 1983:

13 13 DETROIT NEWS ARTICLE TRUSTEE PEGG ASKED THAT BAB ASSOCIATES BE REQUESTED TO RESPOND TO THE DETROIT NEWS JANUARY 4, 2012 ARTICLE TITLED, LEGACY COSTS DIG DEEPER FISCAL HOLE FOR DETROIT ; SPECIFICALLY THE PARAGRAPH WHICH READS PENSION PAYOUTS AMOUNT TO 25 PERCENT OF THE CITY S BILLION DOLLAR GENERAL FUND THIS YEAR AND WOULD GROW TO 50% BY 2015, CITY OFFICIALS HAVE SAID. PUBLIC FORUM AT 12:20 P.M., CHAIRMAN NEARY DECLARED THE MEETING IN OPEN FORUM FOR GENERAL DISCUSSION BY THE PUBLIC ATTENDING THE MEETING. ADJOURNMENT THERE BEING NO FURTHER BUSINESS BEFORE THE BOARD, CHAIRMAN NEARY ADJOURNED THE MEETING AT 12:20 P.M. UNTIL THURSDAY, JANUARY 12, 2012 AT 9:00 A.M., IN ROOM 910 OF THE COLEMAN A. YOUNG MUNICIPAL CENTER, DETROIT, MICHIGAN RESPECTFULLY SUBMITTED, CYNTHIA A. THOMAS ASSISTANT EXECUTIVE SECRETARY