Or, more specifically, San Francisco Employees' Retirement System (SFERS) board members have to listen and respond to the superior court report, but are under no obligation to follow its advice.
“The grand jury has no authority to enforce its recommendations,” Jerry Lewi, a long-time officer and former president of the California Grand Jurors’ Association, told aiCIO. “Their conclusions are strictly that: recommendations. But the power of persuasion is very significant, and a large portion of jury recommendations are accepted.”
A 19-member civil grand jury investigated SFERS in reaction to weak returns
and losses over the last five years, and its concluding report rails against the
fund’s investment policies and decision not to undertake a formal "'failure
analysis subsequent to the funding loss suffered in 2008-2009." The jury, which
Lewi said is “made up of people from all walks of life,” issued a list of six
recommendations for the SFERS' investment team, including a lower rate of
expected return, greater transparency and openness, more thorough risk analysis
and “less volatile and risky investment policies that would attain sufficient
returns” for members.
Lewi acknowledged that jurors are “not expected to be experts” in the subject they are investigating. “I would find it hard to think that a grand jury could make specific investment recommendations. If a report said, ‘You should be investing in stocks instead of bonds,’ it would not be appropriate, in my judgment.”
While the jury’s advice is not legally binding, it does engage closely with questions of risk analysis and asset allocation. Lewi said the pension board is legally bound to answer each piece of advice by agreeing, proving its already been integrated, requesting more time to study the recommendation (to a maximum of three months), or refusing and defending why.
SFERS is in the process of reviewing the report and preparing its responses, according to a statement.
In California, a civil grand jury can investigate any municipal or county pension fund as often as it would like. Nevada is the only state with a similar, albeit less powerful, system.
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