County Asked For Pension Changes Months After Loss

Months after a pension investment backed by subprime mortgages went bust, Baltimore County officials asked the County Council to pass changes to pension regulations barring those same types of investments.

County Budget Director Keith Dorsey asked the council to approve the changes in January 2008—months after a $21 million investment in Mainsail II LLC failed to pay off as expected.

Still unclear is whether or not the council was informed of the failed investment at the time that they were being asked for the changes.

There are no news reports citing a failed investment from the time.

There are also no minutes from the meeting that shed light on Dorsey’s testimony. The council ultimately passed the resolution on Jan. 22, 2008.

County Executive Kevin Kamenetz was chairman of the council at the time. Don Mohler, a spokesman and chief of staff to Kamenetz, declined to comment on the issue and said the county executive would not answer questions about his recollections of that 2008 meeting because of pending litigation.

One key section of the regulations bars the county from directly purchasing investments that include “asset-backed paper, commercial paper with a final maturity date that is extendible at the option of the issuer, and derivative investments,” according to sources who spoke to Patch on condition of anonymity because they were not authorized to speak about the failed investment.

Another key provision is the creation of an investment board made up of Dorsey, County Administrative Officer Fred Homan, county Investment Administrator Robert Burrows and a contractual financial adviser. Sources say the new committee was created in order to provide the type of oversight that was previously missing that may have allowed the bad investment to occur in the first place.

Dorsey and other county officials met in secret Monday with four members of the Baltimore County Council to discuss the Mainsail II LLC investment and a possible lawsuit against Merrill Lynch, the company that sold the investment to the county.

The meeting was not previously announced to the public and council members and county officials who attended have all declined to speak about the subject citing attorney-client privilege.

The issue resurfaced this week after the county asked the council to approve a contract to hire outside counsel to pursue legal action against Merrill Lynch. The county asked for quick passage of the contract citing an impending statute of limitations deadline.

The fund is already the subject of a federal lawsuit brought in 2010 by King County, WA.

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