The U.S. Department of Justice has launched an inquiry related to the Omaha Public Schools pension fund.
Neither the U.S. Attorney’s Office in Omaha, OPS officials nor officials with the Omaha School Employees’ Retirement System (OSERS) would confirm the investigation, and its scope is unclear.
In a staff memorandum last month, OSERS provided notice of the DOJ’s “preliminary inquiry,” telling OSERS staff and current and past trustees that they had a legal duty to preserve all records, emails and texts relative to their roles.
“We intend to cooperate with the DOJ in this inquiry and don’t believe that it will lead to anything to be concerned about,” wrote Donald Erikson, an Omaha bank executive who serves as the president of the OSERS trustees. The World-Herald obtained a copy of the memo, which was dated March 1.
The investigation comes in the wake of a World-Herald series exploring the roots of the $771 million shortfall at OSERS, which is forcing OPS to slash its budget to make additional payments to bring the fund back to solvency.
The newspaper’s investigation revealed mismanagement and bad investment decisions that turned one of the nation’s best performing public pension funds into one of the worst. It also revealed cozy relationships between OSERS leaders and the firms they did business with and potential conflicts of interest related to the fund’s primary adviser, Connecticut-based Atlantic Asset Management.
Atlantic advised OSERS but also sold the trustees investments, with half the pension fund’s $1.2 billion portfolio invested in funds with business ties to Atlantic. The World-Herald investigation found no obvious personal financial ties between Atlantic and the OSERS trustees, made up of district officials and personnel and local business representatives.
Atlantic was already the subject of a previous investigation by the Justice Department and U.S. Securities and Exchange Commission related to a fraudulent scheme that victimized OSERS.
In April 2015, the longtime principals of Atlantic, who had worked with OSERS for more than two decades, sold the firm. The new owners were quietly backed by a family of known white collar criminals who were buying the firm solely to pilfer client funds.
Within days of the firm’s transfer, OSERS was swindled out of $16 million in a bogus bond scheme.
The case resulted in federal charges against seven people associated with Atlantic’s new ownership. None of Atlantic’s previous owners were implicated in the scheme.
It’s unclear whether the new inquiry is tied to the previous case or related to The World-Herald’s revelations.
“I can’t comment on whether there is an investigation open in our office,” said Michael Norris, chief of the general crimes unit in the U.S. Attorney’s Office in Nebraska.
Cecelia Carter, the executive director of OSERS who was hired in 2016, also declined to comment.
Monique Farmer, a spokeswoman for the Omaha Public Schools, declined to answer questions about the Justice Department inquiry.
On March 4, the OPS school board hired the Omaha law firm of Dornan, Troia, Howard, Breitkreutz and Conway as a special counsel to the district. The item was included on the board’s consent agenda, so the reason for the decision was not publicly discussed.
The hiring of the firm came three days after the OSERS memo revealing the Justice inquiry. Farmer did not respond to repeated questions on why OPS hired the law firm.
OPS faces years of annual extra payments required to pay down the pension system’s shortfall. It cut $19 million from its budget to make last year’s payment. This year’s payment is currently estimated at nearly $26 million — more than 4 percent of the district’s budget.
World-Herald staff writer Erin Duffy contributed to this report.