SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION RETIREMENT BOARD MEETING MINUTES Thursday, July 2, :30 a~m.

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1 SAN DIEGO COUNTY EMPLOYEES RETIREMENT ASSOCIATION RETIREMENT BOARD MEETING MINUTES Thursday, July 2, :30 a~m. SDCERA BOARDROOM PRESENT: ABSENT: STAFF PRESENT: E. F. Skip Murphy, Chair David Myers, Vice-Chair Dick Vortmann, Secretary Samantha Begovich, Trustee Dianne Jacob, Trustee Dan McAllister, Trustee Kristina Maxwell, Trustee Richard Tartre, Trustee James Feeley, Alternate Trustee Tim Hancock, Alternate Trustee Mark E. Oemcke, Trustee David Wescoe, Interim Chief Executive Officer Scott Metzger, Interim General Counsel Johanna Shick, Chief Service Officer Greg Bych, Chief Financial Officer These minutes provide a summary of the meeting. Audio and video of the complete Open Session of the meeting is available at There being a quorum present, E. F. Skip Murphy, Chair, called the meeting to order at 8:36 a.m. in the SDCERA Boardroom, Second Floor, 2275 Rio Bonito Way, San Diego, CA , and led the Board in the Pledge of Allegiance to the Flag of the United States. 1. Public Communications The Board encourages the participation of the public, plan members, beneficiaries, and/or representatives. If you wish to address the Board on a subject not included as an item on today s agenda, you may do so during the Public Communication portion of the agenda at the beginning of the Board meeting. If you wish to address the Board on a specific agenda item, you may do so at the time that agenda item is taken up by the Board. If you wish to speak to the Board, please fill out a Speaker s Slip located at the back of the Board Room. You will be called on by the Board Chair at the appropriate time during the agenda. When addressing the Board, please state your name for the record prior to beginning your comments. Speaker comments are limited to five (5) minutes. SDCERA Board Meeting Minutes, July 2, Page I 1

2 There were no requests to speak under this agenda item. 2. Approval of the June 18, 2015 Board Meeting Minutes ACTION: Motion by Dan McAllister, Trustee, seconded by Samantha Begovich, Trustee, to to approve the June 18, 2015 Board Meeting Minutes. Ayes: E. F. Skip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, Secretary, Samantha Begovich, Trustee, Dan McAllister, Trustee, Kristina Maxwell, Trustee, and Richard Tartre, Absent: Dianne Jacob, Trustee, and Mark E. Oemcke, 3. Introductory Remarks: David Wescoe, Interim Chief Executive Officer Mr. Wescoe welcomed Richard Dick Tartre on behalf of the staff, the Association, and the Board, to the Board of Retirement. Mr. Tartre was approved by the County Board of Supervisors on June 23, 2015 to fill a Board seatfrom July 1, 2015 through June 30, Mr. Wescoe expressed his appreciation for Mr. Tartre s willingness to serve. Mr. Wescoe noted the start of a fiscal New Year for SDCERA on July 1. In addition, Mr. Wescoe also noted that it was SDCERA s 76th anniversary as an Association. Mr. Wescoe stated that with the projects that SDCERA is working on in 2016, this could be one of the most productive years in history of the Association. Chairman Murphy also welcomed Mr. Tartre on behalf of the Board. Trustee Jacob arrived at 8:39 a.m. 4. DiscussionlAction on Board Officer Elections a) Nomination for Board Chair b) Nomination for Board Vice-Chair c) Nomination for Board Secretary Chairman Murphy announced that he had a request to speak from Matt Clay, President of the Deputy Sheriffs Association of San Diego County (DSASD). Mr. Clay informed the Board that for the last several months, the deputies that are represented by the DSASD had grown increasingly concerned about the changes in senior leadership, key management positions, and investment strategies at SDCERA Board Meeting Minutes, July 2, Page I 2

3 SDCERA. He urged the Board to proceed with great prudence and measured thought with the election of the Executive Committee and stated that the DSASD believed that this board should continue with the existing executive members, Chairman Skip Murphy, Vice Chair David Myers, and Secretary Dick Vortmann. Trustee Vortmann stated that he was going to make a motion on this subject and recommend that the Board waive their 2-year limit on the role of the Chair after one year, and have the existing Chair continue on for this year to get through the transition. However, since Trustee Oemcke was not present at today s meeting and Trustee Vortmann stated that he believed Trustee Tartre was probably not prepared to vote on these matters, Trustee Vortmann suggested deferring this action for one month, that the current Chair continue in that role until there is a full board in attendance at the next meeting, and Trustee Tartre would be ready to participate in any vote at that point and time. Chairman Murphy asked Interim General Counsel, Scott Metzger, if he had any issues with the motion. Mr. Metzger replied that there were no issues and that it would be in conformance with the Board Policy Governance Section 3(2)(A)(1) which provides incumbance for Chairman in affect either for the period or until a new election is held. Trustee Jacob stated that she didn t have a problem delaying the vote. She noted that all of the changes so far that have taken place have been extremely positive, and she will support the motion. Trustee Begovich asked if the motion was to defer the entire ballot until August. Trustee Vortmann replied that it was his intention to defer the entire ballot but it occurred to him that since his name was there, he didn t know if that was appropriate. Trustee Begovich stated she would adopt Trustee Vortmann s language and made the motion to defer the entire discussion and action on this particular item in terms of executive team on the Board until the August meeting. Chairman Murphy stated that the first motion has been withdrawn by the motion maker, and the second concurred. ACTION: Motion by Samantha Begovich, Trustee, seconded by Dan McAllister, Trustee, to defer the entire discussion and action on Board Officer Elections until the August meeting. Trustee Myers stated that the Board is deferring something that should be adopted today for the next 12 months and then go from there. Trustee Myers addressed Trustee Vortmann s point on conflict, and felt that there wasn t any conflict because the Board has a historical record of members who are put on the executive committee that vote for themselves and probably will continue to vote for themselves. SDCERA Board Meeting Minutes, July 2, Page I 3

4 Ayes: E. F. Skip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, Absent: Mark F. Oemcke, 5. Consent Calendar If you wish to address the Board on a Consent Calendar item, please fill out a Speaker s Slip. These slips are located at the back of the Board Room. You will be called by the Board Chair at the appropriate time during the agenda. When addressing the Board, please state your name for the record prior to beginning your comments. Speakers will be limited to five (5) minutes. The Board will consider and vote on applications for disability retirement in open session with the following exception: the Board will consider and vote on applications in closed session pursuant to Government Code Section when the applicant has requested a closed session and the Board votes to grant the applicant s requests. A. Disability Consent Calendar Applications 1) Member application on Karen M. Leever for a Service-Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted. 2) Member application on Iris C. Manzur for a Nonservice-Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted. 3) Member application on Kathleen M. Murphy for a Service-Connected Disability Retirement. Adopt Administrative Recommendation that the application is granted. 4) Member application on Steven L. Rossall for a Service-Connected Disability Retirement. Adopt the Administrative Recommendation that the application is granted. B. Member Deaths and Service Retirement Applications for June ) Death Benefits (Active Members) 2) Death Benefits (Retired Members) SDCERA Board Meeting Minutes, July 2, Page I 4

5 3) Service Retirements ACTION: Motion by David Myers, Vice-Chair, seconded by Dan McAllister, Trustee, to adopt the Disability Consent Calendar applications 5.A.1, 5.A.2, 5.A.3, 5.A.4, and 5.B.1, 5.B.2, and 5.B.3. Ayes: E. F. Skip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, Absent: Mark E. Oemcke, 6. Disability Retirement Application Hearings The Board will consider and vote on applications for disability retirement in open session with the following exception: the Board will consider and vote on applications in closed session pursuant to Government Code Section when the applicant has requested a closed session and the Board votes to grant the applicant s requests. A. Hearing Officer Recommendations: None 7. Applicant s Motion for Attorneys Fees: Application of Larry Trapp for attorneys fees pursuant to Rule 25 of the Procedures and Regulations for Disability Retirement Matters Mr. Metzger referred to the memorandum on this issue and explained the reason for the staffs recommendation. Trustee Vortmann asked if the policy gives the Board the discretion to grant fees or the obligation. Mr. Metzger responded that it actually gives the Hearing Officer discretion and by implication it would give the Board discretion to grant fees as well. Mr. Metzger stated that the Board used their discretion to grant the application. The fee issue is a separate item that requires the application of the Board s discretion. Trustee Vortmann stated that it seemed there was a technicality with the policy, which says the Board has discretion to grant fees if and when the applicant receives more money from the Hearing Officer then what we originally offered. Trustee Vortmann asked if this was consistent with the policy, or do we need to do something to accommodate that? Mr. Metzger responded that the policy needs to be amended to address this situation. The policy that is written doesn t contemplate the grant of an application on a de novo review. Mr. Metzger has drafted a few sentences that could be added SDCERA Board Meeting Minutes, July 2, Page I 5

6 to the policy that will cover this issue in the future. Trustee Myers stated that he was not comfortable with staff s recommendation to grant the $6,000 because he didn t think it was the intent of the policy, nor drafting it in this type of a case to grant that, and was not in favor of the staff s recommendations. After Trustee Myers made his comment, Trustee Begovich made a motion. ACTION: Motion by Samantha Begovich, Trustee, seconded by Dianne Jacob, Trustee, to adopt staffs recommendation. Trustee Jacob stated she understood that it may not have been the intent of the policy to begin with but the way she saw what staff has brought forward, it s a win for the applicant, and it s a win for SDCERA because SDCERA actually financially benefits from this, as she understood what has been explained to the Board. Trustee Jacob asked if the policy would be amended today or is the Board simply directing staff to put amendments in the policy, which will then be presented to the Board? Mr. Metzger responded that the Board would direct staff to amend the policy, then staff will present an amended policy to the Board for adoption at the next administrative meeting. Trustee Jacob asked if the recommendation would be to grant applicant Larry Trapp s motion for attorney s fees and costs in the limited amount of $6,000 and direct staff to amend the Board policy, procedures, and regulations for Disability Matters Section 2, Rule 25 to allow award of attorney s fees and costs to applicants upon Board determinations of greater net benefit and come back to the board with the amended policy at the next meeting. Mr. Metzger replied yes. Trustee Jacob stated that if this was the motion, then she would second it. Trustee Jacob also added that Trustee Myers made a good point about the policies which, under normal circumstances, are believed to be perfect when you adopt them, but they re not always perfect, and this is a unique situation where we need to change and we have a situation before us. The motion was approved by majority vote. Ayes: E. F. Skip Murphy, Chair, Dick Vortmann, Secretary, Samantha Begovich, Trustee, Dianne Jacob, Trustee, Dan McAllister, Trustee, Kristina Maxwell, Trustee, and Richard Tartre, Noes: David Myers, Vice-Chair. Absent: Mark E. Oemcke, 8. Interim Chief Executive Officer s Report: David Wescoe, Interim Chief Executive Officer SDCERA Board Meeting Minutes, July 2, Page I 6

7 Mr. Wescoe highlighted the great work of the Management team and the staff on the April-June 2015 Interim Action Plan. With respect to FY 2016, the Senior Team will go offsite for a half-day to develop a 2016 Action Plan. Mr. Wescoe asked all staff at a recent All-Staff Meeting to provide their suggestions as to what they think should be in the Action Plan, as he did with the Management team. Mr. Wescoe reported that the membership just topped 40,000 for the first time in SDCERA history. When SDCERA was found in 1939, there were 3 vested members and the average retirement benefit was $64. Mr. Wescoe noted that the Board will hear from Stephen Sexauer in Closed Session on several matters regarding investments. Mr. Wescoe introduced Larry Foos, who has 15 years of county service. Marilou Balagtas, who has 20 years of county service, wasn t able to be at the meeting. Mr. Wescoe reported that in addition to the Employees of the Week, he has instituted a Why? Award, which recognizes staff for asking why and if the process is the most efficient and effective manner possible. Karen Johansen was the first recipient of the Why? Award for asking why the Members reception area couldn t be more welcoming, and the second recipient was Jackie Hurtado, for asking questions about the dress code and other operational issues. Trustee Vortmann stated that in the Financial Statement, it would be useful for him to not only have the investment benchmark, but also have the actuarial target as the ultimate benchmark on a monthly basis in the Financial Statement. 9. Adoption of Resolution: Adoption of Resolution authorizing Chief Financial Officer Greg Bych as an authorized signatory for SDCERA Mr. Metzger stated that in April, a resolution was adopted with respect to the execution of investment related documents which had Johanna Shick, Chief Service Officer, and Loren de Mey, Director of Private Markets, as signatories. With this resolution, Mr. Bych would take Ms. Shick s position as a signatory on the document. This resolution is necessary because those with whom we do investment business want to see a resolution, it s not necessary for internal purposes. Ms. de Mey was chosen to sign in the investment area for her investment expertise and is a law school graduate. Trustee Vortmann asked what the reason was for Ms. de Mey being the signatorie and not Steve Sexauer, Chief Investment Officer. Mr. Metzger replied that because Ms. de Mey is a law school graduate and has all the investment experience, and Mr. Wescoe added that it was Mr. Sexauer s recommendation that Ms. de Mey be the signatory given her position as Assistant Chief Investment Officer, her legal training, and the demands of the department. ACTION: Motion by David Myers, Vice-Chair, seconded by Dan McAllister, Trustee, to adopt the Resolution authorizing Chief Financial Officer Greg Bych as an authorized signatory for SDCERA. SDCERA Board Meeting Minutes, July 2, Page 7

8 Ayes: Absent: F. F. Skip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, Mark E. Oemcke, 10. Seminars and Conferences Chairman Murphy requested to tentatively add his name to the Verus 2015 Client Summit, held on September 1, 2015 in Seattle, WA, and Trustee Begovich requested to add her name to the SACRS Fall Conference, held on November 17-20, 2015 in San Diego, although she did not see the conference on the Seminars and Conference list. Chairman Murphy stated that the SACRS conference is automatic for all Board members and appropriate staff and is in the Educational Travel Policy. ACTION: Motion by David Myers, Vice-Chair, seconded by Dan McAllister, Trustee, to approve the following seminars and conferences: September 1, 2015 David Myers and Skip Murphy Verus 2015 Client Summit Seattle, WA September 24-25, 2015 Scott Metzger Nossaman LLP s Public Pension & Investments Fiduciaries Forum San Francisco, CA October 7-8, 2015 Phylicia Cicalo-Aiken and Teresa Wiatrowski IPMA-HR Public Pension Fund Roundtable Nashville, TN November 17-20, 2015 Samantha Begovich SACRS Fall 2015 Conference San Diego, CA Ayes: F. F. Skip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, SDCERA Board Meeting Minutes, July 2, Page I 8

9 Absent: Mark E. Oemcke, 11. Information Items The Board went into Recess at 9:11 am. to 9:21 a.m. and then went into Closed Session. 12. Closed Session A. CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION Subdivision (a) of the Government Code Section SDCERA v. WaIler Lansden Dortch & Davis Los Angeles Superior Court, Case No. BC Litigation Counsel: Glaser Weil Fink Jacobs Howard Avchen & Shapiro LLP B. CONFERENCE WITH LEGAL COUNSEL- EXISTING LITIGATION Subdivision (a) of Government Code Section SDC ERA v. County of San Diego San Diego Superior Court, Case No CU-MC-CTL Litigation Counsel: Duckor Spradling Metzger & Wynne C. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION Subdivision (a) of Government Code Section Motors Liquidation Company Avoidance Action Trust v. JPMorgan Chase Bank, N.A., et al., pending in the United States Bankruptcy Court Southern District of New York, Case No (REG) Litigation Counsel: Duckor Spradling Metzger & Wynne D. CONFERENCE WITH LEGAL COUNSEL- EXISTING LITIGATION Subdivision (a) of Government Code Section Deputy Sheriffs Association v. County of San Diego San Diego Superior Court, Case No CU-MC-CTL Litigation Counsel: Crowell & Moring LLP E. PUBLIC EMPLOYMENT Subdivision (b) (1) of Government Code Section Title: Chief Executive Officer F. CONFERENCE WITH LEGAL COUNSEL- EXISTING LITIGATION Subdivision (a) of Government Code Section Public Defender s Association v. County of San Diego San Diego Superior Court, Case No CU-MC-CTL Litigation Counsel: Crowell & Moring LLP SDCERA Board Meeting Minutes, July 2, Page I 9

10 G. PURCHASE OR SALE OF SPECIFIC FUND INVESTMENTS Government Code Section Conference with Chief Investment Officer regarding the purchase or sale of specific pension fund investments The Board Reconvened at 10:20 a.m. 13. Termination of Investment Managers: Grant of authority to the Chief Investment Officer, subject to the approval of the Interim Chief Executive Officer, to terminate any investment manager currently a part of the Public Market Portfolio supervised by Salient Partners Chairman Murphy announced that relative to the authority of the CIO, he would recommend a motion that SDCERA s Chief Investment Officer, with the concurrence of the Interim Chief Executive Officer, be authorized to terminate any investment manager managing funds which are currently a part of the Public or Private Markets Portfolios supervised by Salient Partners. This authority will remain in effect through the transition from Salient Partners, or September 18, 2015, whichever occurs first. ACTION: Motion by Dianne Jacob, Trustee, seconded by Samantha Begovich, Trustee, to grant authority to the Chief Investment Officer, with the concurrence of the Interim Chief Executive Officer, to be authorized to terminate any investment manager managing funds which are currently a part of the Public or Private Markets Portfolios supervised by Salient Partners. This authority will remain in effect through the transition from Salient Partners, or September 18, 2015, whichever occurs first. Ayes: E. F. TTSkip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, Absent: Mark E. Oemcke, 14. Retention of Investment Managers: Grant of authority to the Chief Investment Officer, subject to the approval of the Interim Chief Executive Officer, to retain investment managers to assume management of funds which were a part of the Public Market Portfolio managed by Salient Partners Chairman Murphy stated that regarding the retention of Investment Managers, he recommended that a motion that SDCERA s Chief Investment Officer, with the concurrence of the Interim Chief Executive Officer, be authorized to retain investment managers and one or more transition managers to assume the management of funds which are a part of the Public or Private Markets Portfolios supervised by Salient Partners. This authority will remain in effect through the SDCERA Board Meeting Minutes, July 2, Page 110

11 transition from Salient Partners, or September 18, 2015, whichever occurs first. ACTION: Motion by Dianne Jacob, Trustee, seconded by Samantha Begovich, Trustee, to grant authority to the Chief Investment Officer, with the concurrence of the Interim Chief Executive Officer, to be authorized to retain investment managers and one or more transition managers to assume the management of funds which are a part of the Public or Private Markets Portfolios supervised by Salient Partners. This authority will remain in effect through the transition from Salient Partners, or September 18, 2015, whichever occurs first. Ayes: E. F. Skip Murphy, Chair, David Myers, Vice-Chair, Dick Vortmann, Absent: Mark E. Oemcke, 15. Report Out If Required, Decision Made On Closed Session Items There was nothing to report out of Closed Session. 16. Other Business A. Future Agenda Items/Matters to be referred to staff. There were no items referred to staff. B. The next meeting of the Board of Retirement will be held on July 16, 2015, at 8:30 a.m., in the SDCERA Boardroom, Second Floor, 2275 Rio Bonito Way, San Diego, CA Adjournment The Chair adjourned the meeting at 10:24 a.m. E. F. Skip Murphy, Chairman Dick Vortmann, Secretary SDCERA Board Meeting Minutes, July 2, Page I 11