Board members imply trust management debate wasn’t fairBoth of the locally-based participants who had expressed interest in managing the Cloquet School District’s Other Post-Employment Benefits (OPEB) trusts have withdrawn from consideration, amid discussion about whether local companies were given sufficient opportunity to participate in the process.
By: Jeff Papas, Pine Journal
Both of the locally-based participants who had expressed interest in managing the Cloquet School District’s Other Post-Employment Benefits (OPEB) trusts have withdrawn from consideration, amid discussion about whether local companies were given sufficient opportunity to participate in the process.
Split Rock Financial Management of Duluth and Cloquet pulled out of the process after the Cloquet School Board requested additional information about potential fees from the five firms who had expressed interest in managing the trust.
However, another of the participants in the process, Ameriprise Financial, expressed public concern about the process by which a new trust fund manager may or may not be selected. Ameriprise withdrew from consideration last week.
At Monday night’s Cloquet School Board meeting, two board members stopped just short of accusing administration of deliberately excluding Ameriprise from the process.
“I think there was some funny stuff going on,” board member Sandy Crowley said. “That’s all I’m going to say about it.”
Board member Jim Crowley, expressed his feelings differently. “I think Ameriprise felt they were stonewalled,” he said.
A motion at the Aug. 13 meeting to award management of the $6 million trust fund to Ameriprise failed on a 3-3 tie vote. At that meeting, board members directed Business Manager Kim Josephson to ask the five companies for further clarification on the fees they might charge given two different potential investment scenarios. An email to that effect went out Aug. 31 asking for replies by Sept. 7.
That period included the long Labor Day weekend, and as such the email drew a sharp response from Cloquet Ameriprise representative Craig Swenson. He emailed Josephson, Superintendent Ken Scarbrough, Jim and Sandy Crowley and Board Chair Gary Huard Sept. 4 regarding his disillusionment with the process, not having sufficient time to meet the deadline, and his belief that administration was against finding a local provider.
“I’ve flat out just about had it with this process,” Swenson said in his email. “Kim (Josephson), you’ve been against me all along in the process. So I should stop all my other work to spend the 16 to 24 hours answering your questionaire (sic) to give you ammunition on ‘fees’ to not select me since your ‘experience’ argument isn’t holding enough weight?”
Josephson, who had expressed his preference earlier in the process to work with a vendor with OPEB trust experience that Ameriprise does not possess, replied by email later that morning saying that all applicants had been treated the same way, and that the district’s annual financial audit which occurred in late August had taken precedence in terms of allocating his time.
“I have not heard from any other vendor indicating that they can’t make that deadline,” Josephson said in his reply. “If I do, we could reconsider the deadline.”
Scarbrough said he contacted Swenson on Tuesday to ask if Ameriprise still wished to be included in the process and received a negative reply.
“I don’t think [Ameriprise was] stonewalled,” Scarbrough said. “We sent everyone the same information at the same time. This is a new process for us [selecting a fund manager], though I admit a business perspective might be different.”
“(Ameriprise representative) Paul Munson works with the Cloquet Education Foundation and does an outstanding job,” Scarbrough added. “We value that partnership a lot, and with Craig, too. There’s frustration here, but nothing we can’t get over.”
Swenson said his concern was over the ability of local companies to take part in the process of fund management from the beginning, and claimed administration had “sat on its hands” regarding soliciting local input.
“The trust was first awarded to an out-of-town company [current manager PMA Financial Network] without local input,” Swenson said. “Then when the district wanted to talk about return, the request was made again without local input. It’s a big hornet’s nest.”
PMA, PFM Financial Management and Wells Fargo, the other three participants in the process, responded to Josephson’s request by the deadline date. Their answers were given to board members by Josephson at Monday’s meeting.
Board members asked Josephson to make a recommendation from the available options, with an answer expected by the Sept. 24 meeting.
Board members can then take action if they wish, or leave the fund in the hands of its present managers and take no action.
The larger issue of the district’s support for local businesses was a cause of concern for Jim Crowley as well.
“We are going to try to get a referendum passed next year,” he said. “It would be good to have the support of local businesses when we try to do that.”