We wrote recently about the latest chapter in the long-running Kentucky Retirement Systems, now rebranded as Kentucky Public Pension Authority case, in More Kentucky Dirty Dealings: Attorney General Schemes to Leave Hundreds of Millions in Pension Recovery on the Table, Give Sweetheart Payout to Attorneys, To Settle Claims Against Private Equity Kingpins KKR and Blackstone, Including Ones by Plaintiffs the AG Does Not Represent. This post contains a summary of this long-running saga in the Background section.
In a recent article, the Courier-Journal provided a short recap but skips over the matter of how sleazy the conduct of attorney general’s hired attorney, Ann Oldfather, has been:
The proposed settlement announced by Coleman on Jan. 8 would end all open lawsuits and mark the end of the legal dispute that started in 2017, when a group of eight retirees under Kentucky Public Pension Authority (then Kentucky Retirement Systems) sued several hedge funds over allegations the financial firms had mismanaged more than $1 billion of assets in unreliable investments.
The state Supreme Court dismissed that case in 2020 after it found the plaintiffs had retirement plans with benefits that would not change based on the pension system investments’ success or failure. But then-Attorney General Daniel Cameron intervened to take it over, and the proposed settlement would put it to an end.
The separate lawsuit that’s still open was filed in 2021 by Lerach on behalf of several “Tier 3” state employees, whose retirement plans rely on the pension system’s financial success.
She wants to ensure the settlement plaintiffs believe is inadequate doesn’t shut the door on their pursuit for more money from the defendant hedge funds and their owners: KKR & Co., Prisma Capital Partners, The Blackstone Group and Pacific Alternative Asset Management.
The lawsuit’s latest filing pokes several holes in the settlement, arguing it would only marginally benefit the state and its employees while giving an exit ramp to legal teams on both sides after years of litigation.
A key point is the contingency fees for the attorney general’s outside legal team.
The deal Cameron’s office signed with Louisville lawyer Ann Oldfather’s office after the initial case was dismissed set terms for fees those attorneys could collect once the lawsuit was settled: 20% of the gross recovery’s first $250 million; 15% of the gross recovery between $250 million to $1 billion; and 10% of the gross recovery past $1 billion.
If the gross recovery is $227.5 million — a figure that includes the $145 million Kentucky had given to KKR (one of the four hedge funds in the case) that has been withheld as the litigation moved forward — then attorney fees would rise to $45.5 million, a higher sum than the $37 million in new money the state would receive. If the gross recovery does not include that $145 million, attorney fees would reach $16.5 million, with $66 million in new funds going to the state,
Oldfather’s hiring followed passage of a budget bill in the 2021 General Assembly, which let the attorney general’s office choose outside counsel to help with the complicated case. Gov. Andy Beshear vetoed that portion of the bill when it came to his desk, citing “unprecedented authorization (which) provides no guardrails on how much the rate of payments will be,” but that veto was overridden by the House and Senate when the bill returned to the legislature.
To state it more plainly: this settlement is a huge gimmie to the hedge funds and their very famous kingpins, Henry Kravis, George Roberts, Steve Schwarzman, and Tomlinson Hill, who violated Kentucky’s strict fiduciary duty laws by among other things, grossly misrepresenting the risks and likely returns of customized hedge funds of funds.
And it looks to grotesquely and unjustifiably enrich the Attorney General’s privately-hired attorney, Ann Oldfather, by paying her fees, not on an actual settlement of damages, but on a total falsely claimed “settlement” of $227 million. That figure includes at least $137 million of assets that are the property of Kentucky Retirement Systems and have been effectively and illegally confiscated by KKR. Michelle Lerach, the attorney for the so-called Tier 3 plaintiffs, already has a claim in arguing that Kentucky Retirement System is owed interest as well as treble damage on the stolen funds. With the passage of additional time increasing the interest amount, that suit alone is worth $807 million.
And that’s far from the only liability exposure here. There are other exposures for KKR, as well as for Blackstone and PAAMCO, a subsidiary of the famed Pacific Asset Management, as well as the big-name, very deep pocket principals of KKR and Blackstone.
A new filing, which we have embedded at the end of this post, provides more detail about the degree of sleazy dealing by the Kentucky Attorney General, Russell Coleman, and his stooge, attorney Ann Oldfather, who if the legal profession actually lived up to the standards it pretends to uphold, should have been disbarred. For a quick gander through the arguments, the table of contents provides a fine overview, although I encourage you to read the entire filing.
The issue is not just the outrage that it is probable that Oldfather is getting an egregious level of fees that will exceed the bona fide recovery for the long-suffering Kentucky pension funds and the taxpayers that ultimately backstop them. The amount Kentucky Retirement Systems (now KPPA) would get, ex their own monies that have been impermissibly held for years, is $82.5 million. Oldfather’s fee, in a deal Governor Beshear vetoed but was overruled, allows her to collect a 20% fee on the pension fund’s own assets!
As the filing below argues:
There is no expert or independent valuation of the value of the Settlement offered by the Movants. The only valuation is given by unsworn statements of persons with a direct financial or political stake in the outcome of these litigations. The return of previously invested Trust monies, which have always been Trust assets, to KPPA is not a “monetary recovery.” KPPA just got back physical possession of what was already the Trust’s property, i.e., investment funds — just wrongfully withheld by KKR. As Anthony Gales, a certified public accountant, explains in his declaration, the “recovery” did not impact or improve KPPA’s or the Trusts’ financial condition/position or balance sheets by one cent. Ex. 22 ¶ 6. That fund of “previously invested” Trust funds is and always was a Trust asset. Id. Now it is simply being returned, without interest or penalty, despite its wrongful withholding by the Hedge Fund Sellers for years.
If Oldfather claims the entire $227.5 million (as opposed to the $82.5 million portion) as the “Gross Recovery,” the attorneys’ fees will be a staggering $45.5 million, and the net recovery from the proposed Settlement will fall to $37 million ($82.5 million minus $45.5 million). And even if she claims only the “fresh money” portion of $82.5 million as the “gross recovery,” the attorneys’ fees will be $16.5 million, and the net recovery will be $66 million.
Before getting any further, the very fact that the Kentucky Retirement System got into super high fee hedge funds of funds already self-identified them as marks. But Oldfather’s conduct is beyond the pale
I have worked with the very top firms in the US (Sullivan & Cromwell, Cravath, Cleary Gottlieb, Fried Frank, Covington) as well as many reputable small firms. All are strict about clearing for conflicts of interest before working with a new client and obtaining a waiver from the older client there is a conflict and the prospective client still wants to proceed.
Oldfather worked for the original “Mayberry 8” plaintiffs, and after she was fired by them for incompetence and disloyalty, stole confidential information to work against them, via seeking a settlement on the cheap. We described earlier how the previous Attorney General Daniel Cameron suddenly entered (after the Attorney General’s office had decided to step aside and had praised the competence of the Lerach team), claiming he could “occupy the field” and settle claims on behalf of all plaintiffs. Note the Judge Thomas Wingate has ruled otherwise, that the claims and interests of the Tier 3 plaintiffs are distinct and the Attorney General cannot represent them (note that at the time, KRS also bleated that the Attorney General could not represent them unless KRS had engaged him, which they had not done).
Again, briefly, Cameron, who as a Mitch McConnell protege, was presumably trying to curry favor with KKR and Blackstone, strongly aligned with the Republican party, failed to get a deal. The financial kahunas apparently thought then that the odds of the Tier 3 plaintiffs prevailing were so low that they could hang tough.
But now that the case has advanced to the point that discovery was about to begin, the money men look to have changed their minds, resulting in a proposed settlement via the current Attorney General, Russell Coleman.
And Oldfather’s conduct was as dirty and self-serving as could be imagined, even by the imaginative. From a press release by Oldfather’s former client, Jeff Mayberry, that we have embedded at the end of this post:
Several years ago, I, along with the late Circuit Judge Brandy Brown and other state employees, started a lawsuit to recover damages for our public employee pension plan which had collapsed in a “death spiral” and was “virtually bankrupt.” Judge Brown and I retained our longtime friend and lawyer, Michelle Ciccarelli Lerach, who went to law school here in Kentucky and then went on to gain impressive achievements and experience in similar litigation, suing Wall Street Banks, like the Hedge Fund Sellers, Blackstone and KKR, and their top executives Stephen Schwarzman, Henry Kravis and George Roberts. Our lawsuit sought billions in compensatory and punitive damages. When it was ready to be filed, we located Ann Oldfather, a Louisville lawyer, as a possible local Counsel. After Oldfather signed a Confidentiality Agreement, she was hired as local counsel and our case was filed.
Oldfather proved impossible to work with. After several months Judge Brown, I and the other “Mayberry Five” terminated Oldfather for incompetence, failure to follow orders, deceitful practices and disloyalty. See attached September 3, 2019 letter of the Mayberry Five, which details Oldfather’s failures, her termination for cause. The letter specifically warned her to obey her duties as a terminated lawyer to her former clients i.e. to protect and preserve their confidences and work product of their lawyers who hired her.
After Oldfather was fired, she immediately sought to betray us. She went to former AG Cameron and got him to hire her – including getting special legislation to pay her a fee way beyond that legally allowed at that time. Oldfather then used the stolen work product and confidential information, which I understand a terminated lawyer is not allowed to do under Kentucky Supreme Court Rules, to file her case for AG Cameron. As Judge Shepherd said, the AG “copied” my original complaint. Cameron then took over the case Judge Brown, I and the others had filed, excluding us from any participation.
Governor Andy Beshear vetoed the special fee legislation that was enacted without a hearing or any competitive bidding process to give Oldfather an enhanced 20% contingent fee. Governor Beshear said “I am vetoing… because this provision permits the AG to bypass the Statutory Model Procurement Code to hire lawyers for a single case. This unprecedented authorization would allow a quid pro quo situation and provides no guard rails on how much the rate of payments will be, provides for no competition among qualified law firms and does not ensure accountability with Taxpayer dollars.” Absent that special legislation the most Oldfather would be entitled to is about $7 million, computed on the $82 million cash portion of the recovery – far less than the $46 million I believe she is trying to secretly get.
Governor Beshear vetoed the special fee legislation because it reeked of corruption. But AG Cameron got the veto overridden. Oldfather, after having been fired for cause, was then allowed by AG Cameron to file a taxpayer suit using materials and information she stole from us and our lawyers. Now she is attempting to settle that case for pennies on the dollar, where KPPA ends up with only $36 million in new money. This is underhanded, abusive and must be stopped.
I have seen Press Reports detailing how this settlement being attempted by Oldfather is a deceptive sham. The claimed settlement amount of $227 million is false. $145 million of that $227 million is already KPPA trust funds that are merely being turned back over to the trust funds after having been wrongfully withheld for years by the Hedge Fund Sellers – and is the subject of a pending motion filed by my lawyer in the Tier 3 Trust Beneficiary case. The remaining $82 million in cash is to be reduced by a secret $46 million fee to the AGs private lawyer. This leaves just $36 million in net new cash for KPPA. A $36 million recovery on a claim the Hedge Fund Sellers repeatedly admitted was worth $50 billion – a .00072 percent recovery.
I trust those of you with friends, family and contacts in Kentucky will send this post to them. Even with frothy financial markets, these pension funds remains seriously underfunded, with taxpayers on the hook to make up for shortfalls. So this financial and political grifting by Oldfather and Coleman is very much at Kentucky taxpayers’ expense.
00 OBJECTION copy-compressed
Capt.Mayberry.Release.2.Feb.2025