Federal Judge Once Again Calls AFM-EPF Trustees’ Investment Approach “Exceedingly Risky”

We have consistently maintained that one of the factors contributing to the crisis at the AFM-EPF was mismanagement of the fund by our trustees. One key area of mismanagement was investments, where the trustees gambled our retirement money away on risky and ill-advised bets.

As many of you know, Local 802 members Andy Snitzer and Paul Livant filed a class action lawsuit against the AFM-EPF trustees, charging them with breaches of fiduciary duty. At a recent hearing on the case (see full transcript here), federal Judge Valerie Caproni commented on our trustees’ decision to ratchet up the AFM-EPF’s targeted returns following the 2008 financial crisis. In pursuit of higher returns, the trustees started making outsized bets on things like emerging markets and private equity.

At the hearing on March 1st Judge Caproni said:“I mean they adopted an exceedingly risky strategy and that is part of the gestalt of the facts. Again, there may well be a good record that makes it all make sense. I’m trying to not just look at this like, looking back, it was really a bad decision, but even at the time, they were getting into very risky, illiquid investments, which just doesn’t seem like what a pension fund should be invested in.” (See Transcript page 8)

In the hearing, the attorney for the trustees told the Judge: “The trustees are planning to make an application for relief with the government. That application for relief involves cuts in certain peoples’ benefits and there are many, many participants who are very exercised about this issue.”

To which Judge Caproni said: “Understandably.” (Transcript, page 12)

These comments are remarkably consistent with comments Judge Caproni made in a hearing in 2018, where she called the trustees’ investment approach “extraordinarily risky” and she excoriated the trustees for not having standards for evaluating how outside investment managers were performing. (See MPS piece on the 2018 hearinghere.)

All this underscores the need for pension trustees who know what they are doing. At the upcoming AFM convention that starts this Monday in Las Vegas, there will be a proposed resolution to add an investment expert and an actuarial expert to the Board of trustees at the AFM-EPF.Contact the leaders of your Local and AFM Delegates now and ask them to please support that progressive resolution. The task of overseeing actuaries and investment managers in a multi-billion dollar fund is extraordinarily complex. The training and education that our trustees go through may be helpful, but they cannot possibly provide the kind of sophisticated, and critical, expertise that finance and actuarial professionals would bring to the Board.