Fresno County Board of Retirement s15

BOARD OF RETIREMENT FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION September 20, 2006

Trustees Present:

Michael Cardenas Vicki Crow Steven Jolly Phil Larson A. Papaleo Stephanie Savrnoch William Storey Ronald S. Frye – Alternate, sitting for John Souza

Trustees Absent:

Vera Dominguez John Souza

Others Present:

Michael Cunningham, Retired FCERA Member Bob Solis, Retired FCERA Member Ashley Dunning, Steefel, Levitt, & Weiss Linda Balok, Steefel, Levitt, & Weiss Michael Toumanoff, Steefel, Levitt, & Weiss Harvey Leiderman, Reed Smith Jeffrey Rieger, Reed Smith Barbara Booth Grunwald, Deputy County Counsel Roberto L. Peña, Retirement Administrator Becky Van Wyk, Assistant Retirement Administrator Elizabeth Avalos, Administrative Secretary Sign in Sheet Attached

1. Call to Order

Chair Jolly called the meeting to order at 9:05 AM.

2. Public Presentations

Consent Agenda/Opportunity for Public Comment

Trustee Savrnoch pulled Consent Agenda Item 5.

A motion was made by Trustee Larson, seconded by Trustee Cardenas, to Approve Consent Agenda Items 3, 4, and 6 through 12. VOTE: Unanimous (Absent – Crow, Dominguez)

*3. Approval of the September 6, 2006 Board of Retirement Regular Meeting Minutes

09/20/06 Regular Meeting 2 RECEIVED AND FILED; APPROVED

*4. Request to Rescind Deferred Retirement

RECEIVED AND FILED; APPROVED

Name Department Years Anthony W. Ishii Superior Court 10.04

*5. Summary of monthly statistics from the Retirement Association Office on buybacks, retirement benefit estimates, public service, age adjustments, final compensation calculations and disability retirement applications for August 2006

Trustee Savrnoch inquired as to the timeframe in which Buybacks are being processed.

Roberto L. Peña, Retirement Administrator, stated that depending on the type of buyback the process could take up to one year. Mr. Peña noted that 481 buybacks had been completed for the period September 2005 through August 2006 compared to 145 buybacks for the period September 2004 through August 2005.

A motion was made by Trustee Savrnoch, seconded by Trustee Larson, to Approve Consent Agenda Item 5. VOTE: Unanimous

RECEIVED AND FILED

*6. Public Records Requests and/or Retirement Related Information Requests from William May, Retired FCERA Member and Bob Solis, Retired FCERA Member

RECEIVED AND FILED

*7. FCERA Unaudited Comparative Financial Statements for the six months ending December 31, 2005 and September 30, 2005

RECEIVED AND FILED

*8. Approve Amendments to the FCERA Trustee Due Diligence Policy

*9. Approve Amendments to the Conflict of Interest Code and direct staff to submit to Board of Supervisors for approval

*10. Approve proposed amendments to FCERA Bylaws article II, section F, paragraph 1, regarding the start time of regular meetings, and direct staff to submit amendments to Board of Supervisors for approval (Two-thirds vote required.)

RECEIVED AND FILED; APPROVED 09/20/06 Regular Meeting 3

*11. Request to extend deadline related to Retirement Contributions Collected on Court Transcription Fees

*12. Request by FCERA Administration to write off stale claims for reimbursement from estate

Trustee Crow joined the Board at 9:09 AM.

13.Discussion and appropriate action on selection of legal services; presentations by Harvey Leiderman, Reed Smith and Ashley Dunning, Steefel, Levitt, & Weiss

Roberto L. Peña, Retirement Administrator, opened discussions by reminding the Board of Harvey Leiderman’s decision to leave the firm of Steefel, Levitt, & Weiss (Steefel) and join the firm of Reed Smith. Mr. Peña noted the Board’s previous decision to continue using the services of Attorney Leiderman for the final compensation litigation and to use Steefel for all other legal matters until a decision could be made on which firm to retain.

Ashley Dunning, Steefel, Levitt, & Weiss, began the presentation by reminding the Board that Steefel has been providing legal counsel, advice, and representation to the Fresno County Employees’ Retirement Association (FCERA), its Board of Retirement, and staff since May 2003. Ms. Dunning noted that FCERA is an important client to the firm.

Ms. Dunning noted that in addition to her, the Fiduciary Practice Group includes six attorneys including Linda Balok and Michael Toumanoff. The six attorneys constitute a highly experienced fiduciary team, who are knowledgeable and well-versed in public pension and related laws and who are available to serve FCERA’s needs on an on- going basis. Ms. Dunning stated that Mr. Toumanoff has been advising California public pension systems since the early 1990s, and is one of the preeminent attorneys in California in this practice area and that collectively, they have over 30 years of experience representing California public pension funds.

Ms. Dunning stated that in addition to FCERA, Steefel currently serves as fiduciary, litigation, real estate, investment, insurance coverage and/or outside general counsel to twelve other public employee retirement systems in California.

Ms. Dunning reviewed the billing rates and noted that the rate for Linda Balok was incorrectly stated at $355/hour. Ms. Balok’s hourly rate is $325/hour.

Linda Balok, Steefel, Levitt, & Weiss, stated that she advises several California public pension funds on issues relating to private equity and alternative investment vehicles. Ms. Balok noted that she has significant expertise in the structure of a range of alternative investment vehicles and a wide variety of third party securities’ agreements.

09/20/06 Regular Meeting 4

Ms. Balok continued by noting her substantial experience in real estate matters. Ms. Balok represents a number of real estate developers, operating companies and high net worth individuals in a variety of commercial property transactions and she has successfully applied her securities expertise and her depth in real estate matters in her representation of a real estate investment fund.

Michael Toumanoff, Steefel, explained to the Board his reasons for joining the firm of Steefel, Levitt, & Weiss and gave a brief overview of his law background. Mr. Toumanoff noted that the he has specialized in the law affecting public retirement system fiduciaries and has represented and advised several California public pension systems.

In response to a question from Trustee Larson, Mr. Toumanoff stated the difference between an Article 5 County and an Article 5.5 County as being the Board of an Article 5 County has the discretion to determine how excess earnings are distributed.

In response to questions from Chair Jolly, Ms. Dunning stated that Harvey Leiderman, Reed Smith left his position at Steefel to represent publicly held companies that are governed by ERISA and that approximately 10% of Steefel’s business is dedicated to public pension systems.

Trustee Frye inquired as to rate increases. Ms. Dunning stated that Steefel has charged FCERA $300/hour for her time and that the rate is approximately 20% less that her normal rate. Steefel has agreed to continue with that rate until January 1, 2007 at which time the hourly rate will increase to $360/hour.

In response to a comment from Trustee Cardenas, Ms. Dunning stated that the law prohibits a single law firm from acting in both an advocacy role on behalf of the retirement system in disability application hearings and advising the Board in its fiduciary and adjudicatory capacity on those same applications. Accordingly, they restrict their role with respect to advising on disability applications to advising boards of retirement in their fiduciary capacity.

For disclosure purposes, Roberto L. Peña noted that he and Mr. Toumanoff had worked together when Mr. Peña was employed with the Kern County Employees’ Retirement Association.

In response to a question from Mr. Peña, Ms. Dunning noted that Steefel has been through similar selection processes with other Counties and that the majority have decided to stay with Steefel.

In response to a question from Mr. Peña, Ms. Dunning stated that Steefel will provide FCERA with exemplary service in all areas where strong legal services are needed such as board counsel, fiduciary counsel, litigation, investments, and real estate. Ms. Dunning also noted that Steefel is cost effective, committed and, in contrast to the competition, has substantial experience as Board Counsel.

Discussions, questions, and comments followed.

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Harvey Leiderman, Reed Smith, began the presentation by reminding the Board that he, along with Jeffrey Rieger, have been primarily responsible for advising the Board and FCERA staff on numerous fiduciary, administrative, litigation and other legal issues during the last 3 ½ years. Mr. Leiderman noted that Mr. Rieger had joined the Reed Smith firm as well and that they will continue working together to guide FCERA staff on a day-to-day basis and the Board on a special needs basis.

Mr. Leiderman stated that, in addition to successfully representing FCERA in the “Fresno Method” litigation he and Mr. Rieger have also advised the Board and staff in other areas.

Mr. Leiderman noted that he believes that his extensive experience uniquely qualifies him to continue to provide top quality services to the Board and staff as General Counsel, including taking on the important responsibility of serving as independent, “capital F” Fiduciary Counsel to the Board.

Mr. Leiderman stated that he has demonstrated that he is an effective advocate, can give effective guidance to the Board keeping in mind expenses, efficiency, and the interest of the members.

Mr. Leiderman strongly believes that the Board would be well served by having Mr. Rieger attending the Regular Board Meetings. Mr. Leiderman would continue to be available to attend Board meeting when necessary (by telephone or in person, as appropriate).

Jeffrey Rieger, Reed Smith, gave a brief summary of his background with FCERA and other retirement systems and explained his reasons for leaving Steefel and joining the Reed Smith firm.

In response to a question from Chair Jolly, Mr. Leiderman stated that he had resigned his position at Steefel simply because he felt that they did not have the talent and expertise available to fully serve his pension fund clients the way he felt they should be served. Mr. Leiderman noted that he would also explore an ERISA practice, although this was not the reason he left Steefel.

In response to a question from Chair Jolly, Mr. Leiderman stated that because of his fiduciary role to his partners at Steefel, he did not solicit anyone to join him at Reed Smith until after he had left Steefel and at that time Mr. Rieger was the only attorney that he had approached with an offer to join the Reed Smith firm.

In response to a question from Trustee Cardenas, Mr. Leiderman stated that, although, he could serve as an Advisor to the Board on disability cases, it would not be in the best interest of the Board to serve as general counsel and as the system’s advocate in disability hearings. Mr. Leiderman noted that California cases hold that the same attorney may not represent the board as both its general counsel and as an advocate for the system in preliminary administrative hearings. Although, it technically may be possible to erect an “ethical wall” between two different attorneys at the same

09/20/06 Regular Meeting 6 firm, he believes that this solution would erode FCERA members’ confidence in the Board’s independence. In response to a question from Mr. Peña, Mr. Leiderman stated that Reed Smith has been through similar selection processes with other Counties and that the San Diego City Retirement and Orange County Retirement had made decisions to hire Reed Smith and that the other systems had not yet made their decisions.

In response to a question from Mr. Peña, Mr. Leiderman stated that Reed Smith offered an opportunity to expand his capabilities as a fiduciary advisor by being able to serve both the public and private retirement systems.

Mr. Leiderman stated that because responsibility of the Board is extremely important, he feels that he has a substantial advantage to offer guidance through his experiences with other retirement systems.

Trustees Crow, Jolly and Cardenas were heard in favor of hiring Harvey Leiderman, Reed Smith.

Discussions, questions, and comments followed.

A motion was made by Trustee Cardenas, seconded by Trustee Crow to select Harvey Leiderman, Reed Smith, as FCERA’s primary counsel. VOTE: Unanimous (Absent – Dominguez)

A motion was made by Trustee Larson to have Barbara Grunwald, Deputy County Counsel, continue her role at FCERA Board meetings and to have Harvey Leiderman available when necessary.

Discussions, questions, and comments followed in favor of having independent counsel present at Board meetings.

Hearing no second, Trustee Larson withdrew the motion.

The Board agreed to continue discussions regarding which attorney will be present during the Board meetings.

Chair Jolly clarified that it is the Board’s intent to move forward with Reed Smith, but will continue working with Steefel on any outstanding issues.

In response to a question from Bob Solis, Retired FCERA Member, Mr. Peña introduced the FCERA staff that were present at the meeting and gave a brief job description for each. Mr. Peña also summarized Agenda Item 13 for Mr. Solis.

At this time, Chair Jolly thanked Ms. Dunning and Mr. Leiderman for their time presenting to the Board and announced the decision to proceed and continue the relationship with Mr. Leiderman, Reed Smith.

The Board went into Closed Session at this time.

09/20/06 Regular Meeting 7 Roberto L. Peña, Retirement Administrator, pulled Agenda Item 14.a.1. as there was nothing to discuss.

14. Closed Session:

a. Conference with Legal Counsel – Actual Litigation – pursuant to G.C. §54956.9(a)

1. County of Fresno v. Board of Retirement

b. Conference with Legal Counsel – Potential Litigation – pursuant to G.C. §54956.9(b) – one case

c. Disability Retirement Applications – Personnel Exception pursuant to G.C. §54957

1. Ron Adolph 2. Brian Davis 3. Diane Christian

15. Report from Closed Session

14.b. Nothing to Report.

14.c.1. Ron Adolph – Decision – To Approve the Findings of Fact and Decision presented and grant Ron Adolph’s service connected disability. VOTE: Yes – Cardenas, Crow, Frye, Larson, Savrnoch, Storey, Jolly. Abstain – Papaleo. Absent – Dominguez. For disclosure purposes, Chair Jolly noted that Mr. Adolph was a prior FCERA Board Member.

14.c.2. Brian Davis – Direction – The Board directed Administration to return on October 4, 2006 with the Findings of Fact and Decision so that service connected disability can be granted. VOTE: Unanimous. Absent – Dominguez.

14.c.3. Diane Christian – Decision – To Approve the Findings of Fact and Decision presented and grant Diane Christian’s service connected disability. VOTE: Yes – Cardenas, Crow, Frye, Larson, Papaleo, Savrnoch, Storey, Jolly. Absent – Dominguez.

16. Report from FCERA Administration

Mr. Peña reported on the following items:

1. Mr. Peña strongly urged the Board Members to complete the Board Governance Surveys that were e-mailed to them by Tom Iannucci, Cortex.

09/20/06 Regular Meeting 8 2. The Board Retreat is scheduled for October 18-19, 2006 at the Harris Ranch Inn in Coalinga, CA.

Report from FCERA Administration (continued)

3. The Trustees received the Agenda for the Trustees Roundtable scheduled for October 13, 2006 in Santa Barbara, CA.

4. An e-mail will be sent to the Personnel Committee Members to schedule a meeting to begin the Administrator Performance evaluation.

5. The September 22, 2006 Disability Committee Meeting Agenda Packet would be delivered to the Committee Members timely.

17. Report from County Counsel

1. Barbara Booth Grunwald, Deputy County Counsel, assured the Board that she would be available when necessary and is willing to cooperate with private counsel.

18. Board Member Announcements or Reports

1. Trustee Cardenas reminded the Board of the upcoming Due Diligence trip and suggested that the Board Members submit questions to be asked of the managers. Mr. Peña noted that, as part of the next Agenda, he would include questions and input from the Board.

2. Trustee Cardenas suggested that because the Board was unable to meet with Brown Armstrong prior to the start of the audit they be invited to present at the upcoming Board Retreat. Becky Van Wyk, Assistant Retirement Administrator, noted that because of Committee Members’ conflicting schedules, a meeting with the auditors was not scheduled.

There being no further business, the meeting adjourned at 12:00 PM.

Roberto L. Peña Secretary to the Board

09/20/06 Regular Meeting