Atlanta’s Longtime Pension Advisor Resigns In Wake of Alleged Misconduct, SEC Investigation

Gray did not respond to requests for comment, but in a written statement to WABE, Gray & Co. CEO Yolanda Foreman said he resigned from the fund after 17 years because “recent negative media attention has become a distraction for both parties.” She said Gray would help the board transition to a new financial advisor.

Late last year, Gray allegedly steered $28 million in pension money to his own hedge fund without disclosing his affiliation to board members. ​He's also said to have failed to disclose personal debt involving tax liens on his house and a $1 million settlement of a lawsuit accusing him of fraud.

Retired school teacher and pension board member Gregory Nash raised concerns about Gray beginning in November. Nash said he won’t feel vindicated until the board’s 10-year, $28 million commitment to Gray’s hedge fund is revoked.

“My reaction is good and now what about the $28 million? That’s what this is all about. He did not disclose to get the contract,” said Nash.

In January, board member Angela Green filed a complaint against Gray with the U.S. Securities and Exchange Commission. Last week, WABE learned the SEC is investigating the case. 

Until recently, Green maintains her concerns were dismissed and criticized by fellow board members, including Atlanta's Chief Financial Officer Jim Beard and one of Mayor Kasim Reed's appointees on the board, Human Resources Commissioner Yvonne Cowser Yancy.  

At a special-called board meeting Thursday, Beard and Yancy said recent revelations about Gray's personal finances called into question Gray's dual role as financial advisor and fund recipient. Beard added that based on a decision by Mayor Reed, the pension board would no longer allow financial advisors to pitch their own investment funds.

“In reviewing documents about the market I found in my review there are several instances in which consultants also have product. That being said, the mayor of the city of Atlanta has said we want to have a higher standard and that standard would be to separate those two functions,” said Beard after Thursday's special meeting.

Despite Gray's resignation and the recent policy shift on conflicts of interest, Green is still searching for answers.

“I want the SEC and whoever else is investigating to see why [Gray] didn't want to tell me who the company belonged to. Why? Why didn't he want to reveal that?” said Green.

According to board members, Gray’s resignation letter pertains only to his role as the board’s financial advisor, which paid annually about $157,000. The letter apparently does not affect his role as manager of the $28 million contract approved by the board in November. The deal could mean millions for Gray’s firm if the investment performs reasonably well.

Whether the contract can be legally revoked at this point remains unclear. Board chairman Alfred Berry said it'll likely be a topic at their next scheduled meeting this Wednesday.

“We still have an obligation to them to possibly invest $28 million and so for that reason that cloud still hangs over our heads,” said Berry.

It’s also unclear whether Gray will continue serving as the financial advisor to the city’s police and fire pension funds.  Those boards have committed more than $35 million to Gray-owned investment vehicles.

Last week, Mayor Reed called on all city pension boards to take action to address conflicts of interest, perceived or otherwise. In a written statement, Reed welcomed Gray’s resignation and called on the city’s police and fire pension funds to take steps “that produce the same result.”

“I’m pleased to see the General Employees’ Pension Board’s favorable response to my recommendation to address a conflict of interest, perceived or real, with regards to representation by its financial adviser. I’m hoping the Police and Fire Pension Boards follow suit, ” said Reed. “I’m hopeful this resignation will allow this board to return its focus to providing optimal returns to its stakeholders and remove any lingering doubts about perceived conflicts.”

The police and fire pension boards are scheduled to meet Thursday. Requests for comment from those boards were unsuccessful by deadline.