San Bernardino's investment pool will receive $7.75 million as repayment for what the county claims were more than $30 million in investment-pool losses caused by a former Salomon broker, Peter L. Morrison. Another $750,000 will come from a separate agreement with CDC Nvest, a mutual fund.
The majority of the improper investments, which took place between 1992 and 1996, were purchases of mutual fund shares: The broker bought retail shares rather than the wholesale shares governments typically buy. The retail shares enabled Morrison to collect a commission, which he otherwise would not have received. "He was making about $12,000 a month on that investment with us," says the county's treasurer-tax collector, Dick Larsen, who began the investigation after he took office in 2000. He had noticed that too many investments were held in mutual funds and that the county was conducting "an exorbitant amount of transactions with this broker." Morrison was also charged with bribing county employees with vacations and dinners.
Nashville did not lose money following PaineWebber's advice. The dispute centered on PaineWebber's role as the pension fund's exclusive investment consultant. Rather than working for a flat fee, the brokerage firm was paid based on frequency of trades. Fund managers accused PaineWebber of trading too often in order to earn fees and of failing to keep them informed about the risky nature of some of the investments. The dispute was settled for $10.3 million.
