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The Sergeants Benevolent Association has reached a $4.5 million settlement with one of the investment firms that had managed its pension fund. The benevolent association had sued the firm, Trainer Wortham & Co., one of six it hired to invest different portions of its $100 million-plus fund, for causing losses of $18 million. The association, the third largest police union in the nation, has claims for $29 million pending against its former investment advisor, Monitoring and Evaluation Services. The claims against Monitoring and Evaluation Services, which the union hired to monitor all six investment managers, will go to trial before Justice Herman Cahn on Wednesday. Stephen P. Younger of Patterson Belknap Webb & Tyler, who represents the union, called the settlement “a landmark” because, he said, as far as he knows, it marks the first time a city union managing pension funds has held one of its fund managers “accountable for a breach of fiduciary duty.” Liev Blad of Clifford Chance, who represented Trainer, said the investment firm had “done nothing wrong, and over time made money for the union fund.” The settlement, he said, was “at a steep discount from the amount the union had claimed and was consistent with our view they did not have much of a case.” The fund, which the union manages for its 10,000 active and retired members, fell from a high value of $141 million in March 2000 to $96 million in September 2002. The union-run fund supplements pension payments made to all retired police officers from a fund managed by New York City. According to expert reports filed by the benevolent association, Trainer had responsibility at one point for as much as $58 million of the union’s fund. The union’s complaint charged Trainer with investing too large a portion of the funds in high-risk stocks despite an explicit instruction that it invest conservatively. A substantial portion of the $29 million in damages that the benevolent association is seeking to recover from its investment advisor, Monitoring and Evaluation Services, covers losses that the union contends were incurred by Trainer. But Monitoring and Evaluation Services permitted as much as 80 percent of the fund to be invested in stocks when 60 percent would have been more in line with the union’s instruction that the fund be conservatively invested, according to the union’s experts. The losses stemming from over-investment in equities came to $23.8 million, some portion of which was attributable to losses caused by Trainer, according to the experts’ reports. The two sides, however, have a fundamentally different view of the job Monitoring and Evaluation Services was hired to do. According to court papers, the union claims it was hired to develop a conservative investment strategy and to make sure that the six investment managers executed that strategy. In contrast, the company’s papers assert that it had no role in determining how the managers would invest funds, and was limited to monitoring those investments and providing performance reports to the union. The union also asserts in its papers that Monitoring and Evaluation Services did not have personnel qualified to manage its funds. The association’s complaint claimed that the company’s sole owner and president, John T. Renck, holds only a high school diploma and had worked for 10 years as a telephone lineman and installer. He worked another 15 years as a union official and a liaison officer with unions for New York state before first going into the pension-fund field in 1980, the complaint asserts. Renck’s son, John J. Renck, who now runs the company on a day-to-day basis, according to the complaint, has an associates degree from Nassau Community College and no formal Wall Street training or experience. Monitoring and Evaluation Services lawyer, Ronald C. Minkoff of Frankfurt Kurnit Klein & Selz, said his client is “fully licensed and fully qualified to do the job it was contracted to do.” At trial, he said, the company will prove that it “fully discharged its contractual obligations.”

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