Judge hears arguments on proposed settlement between hedge funds, KY public pension systems

Yahoo

26-03-2025

A settlement reached by hedge funds and Kentucky's public pension systems was the subject of a hearing at the Franklin County Courthouse, March 26, 2025. (Kentucky Lantern photo by McKenna Horsley)
FRANKFORT — Franklin Circuit Judge Thomas Wingate told lawyers to expect a decision from him in two weeks in a long-running challenge of hedge fund investments made for Kentucky public pension funds.
Wingate spoke Wednesday at the end of a hearing that he called 'very informative.'
At issue is a proposed $227.5 million settlement unveiled in January by Kentucky Attorney General Russell Coleman.
Attorneys for a group of state employees opposing the settlement say the amount falls far short of compensating the pension funds for what the plaintiffs allege were breaches of fiduciary duty by the hedge funds, in particular what they characterize as excessive fees.
In court Wednesday, an attorney for the state employees, Michelle Ciccarelli Lerach, also said the settlement would 'extinguish' her clients' ability to continue to press their claims on behalf of the pension systems.
'They are trying to wipe us out,' Lerach said. 'Our clients' due process rights are being violated.'
KY state workers group blasts pension settlement with hedge funds, presses its own lawsuit
On the other side, attorney Justin Clark, head of the state attorney general's civil division, told the judge that the benefits of settling far exceed the risks posed by continuing to litigate the case. He stressed that the boards of the three state pension systems have unanimously approved the settlement; he also said state law makes the attorney general responsible for representing the pension systems.
The original case drew national attention when filed by a group of eight state pensioners in late 2017 against some former officials of Kentucky Retirement Systems (now the Kentucky Public Pensions Authority) and major hedge fund companies KKR & Co., Prisma Capital Partners, The Blackstone Group and Pacific Alternative Asset Management. They alleged the financially troubled retirement systems gambled $1.2 billion on secretive, high-risk hedge fund investments that eventually went sour.
The case has gone through several permutations since then and at one point might have reached a dead end but was revived by former Attorney General Daniel Cameron.
The proposed settlement came out of more than five months of negotiations between Attorney General Coleman's office and the defendants and mediated by a former federal judge — a process that Lerach on Wednesday criticized as a 'secret mediation.'