Atlanta firefighters sue pension custodian over ‘risky investments'

By Eric Stirgus

The Atlanta Journal-Constitution

Atlanta firefighters' pension fund has sued the custodian managing its plan, saying it made several risky investments that could cost them about $1 million.

The lawsuit claims that Chicago-based Northern Trust breached its contract and fiduciary duty with mortgage-backed securities investments that ignored the warnings of the company's chief economist. The Chicago Public School Teachers' Pension and Retirement Fund joined in the lawsuit, which was filed Jan. 29 in federal court in Chicago.

"It was supposed to be a safe investment," Atlanta Fire Rescue Lt. Kelen Evans, chair of the firefighters' pension fund, said in an interview Wednesday with The Atlanta Journal-Constitution. "I think (Northern Trust) took too much risk."

Evans estimated the firefighters' fund has about $388 million. While the $1 million they fear losing may be small in comparison, "The firefighters look to me to make sure their investment is safe," he said.

In a written statement, Northern Trust spokesman Doug Holt said the Atlanta fund itself decided to get involved in securities lending, which had "zero realized losses."

"This lawsuit is misguided and Northern Trust will vigorously defend itself against this litigation," Holt said.

Atlanta has three pension funds: one for firefighters and paramedics, one for police officers and one for general employees. The plans have traditionally been underfunded, part of a situation new Mayor Kasim Reed has called a "crisis." Reed has said he is particularly concerned about the city's rising annual investment in pensions. In 2002, it was $36 million. For the 12-month period ending June 30, the city's investment is estimated at $130 million.

Northern Trust also manages investments for the Atlanta police pension fund, which is  not part of this lawsuit.

Police pension fund leader Tony Biello said he has been disappointed in the lack of communication from Northern Trust about those investments. The retired police lieutenant said the fund suffered major losses in 2008 but rebounded last year. Biello said Northern Trust is scheduled to give a presentation to police pension fund leaders next week.

The city's general employees do not use Northern Trust for pension investments.

Staff writer Shelia Poole contributed to this article.