FRANKFORT, KY – The County Employees Retirement System (CERS) has filed a Statement in Support of Settlement in the hedge fund litigation commonly referred to as “Mayberry.” In it, CERS says a proposed settlement in that case resolves numerous lawsuits, including Commonwealth of Kentucky v. KKR & Co. Inc., et al, which was originally filed in 2020 by the Kentucky Office of the Attorney General; a similar lawsuit, Tia Taylor, et al. v. KKR & Co. Inc., et al., filed more recently on behalf of Tier 3 beneficiaries; and related lawsuits in state and federal courts across the country.
“The CERS Board has a fiduciary responsibility to manage the CERS retirement trust – along with the CERS portion of the health insurance trust – for the exclusive benefit of over a quarter-million members,” said Lisle Cheatham, Chairman of the CERS Board of Trustees. “CERS believes the proposed settlement agreement is in the best interest of all its members – including its Tier 3 members – who will share in the benefit of the recovery to the trust as a whole.”
Settlement of the lawsuits involves payment of $227.5 million from the hedge funds, which includes distribution to KPPA of approximately $145 million in assets held by one of the defendants, Prisma Capital, in connection with a potential indemnification claim. All settling defendants continue to deny liability and maintain that they have settled solely to avoid the expense, distraction, and inconvenience of further litigation.
The lawsuits, according to the Statement, have resulted in millions of dollars in legal fees, lost investment opportunities, and the possibility of hundreds of millions of dollars flowing out of the trusts if the plaintiffs were unsuccessful at trial. “CERS did not initiate any of these lawsuits,” Cheatham said. “Yet, throughout the course of this litigation, CERS has shouldered significant financial and operational burdens as a result of its involvement in these matters.” Resolving the lawsuits through the negotiated settlement removes the uncertainty of litigation, allows CERS to focus on its core mission, and recovers significant assets for the system.
In filing the Statement in Support of Settlement with Franklin Circuit Court, CERS recognizes that, should the settlement be approved, the resulting net profit from the hedge fund investments to the systems will total at least $429 million after reducing the revenue received to account for attorney fees already paid and the maximum potential attorney’s fees contemplated by the agreement between the Attorney General and its private counsel. Seventy-five percent (75%) of that profit would be distributed to the CERS trust for the benefit of its members.
Importantly, the Statement also notes that the settlement benefits all members. “The CERS Board, as fiduciaries with the exclusive right and responsibility to manage trust assets, believes that this settlement is in the best interests of all CERS members in every tier,” Cheatham said.
“The proposed settlement provides clarity for the CERS system,” Cheatham continued. “Our hope is that the Court approves the proposed settlement agreement as it is written and enters the tendered approval order. Doing so guarantees an immediate and substantial recovery for all CERS members and terminates the risk of substantial future liability.”
# # #
The Kentucky Public Pensions Authority is responsible for the investment of funds and administration of pension and health insurance benefits for over 433,000 active and retired state and local government employees, state police officers, and nonteaching staff of local school boards and regional universities.
Visit our website at
https://kyret.ky.gov