Key Takeaways
- • Kentucky Attorney General Daniel Cameron revived and expanded the Mayberry v. KKR & Co., L.P. case on July 21, 2020, after the Kentucky Supreme Court dismissed the original plaintiffs' lawsuit earlier that month, arguing they lacked standing to bring the action.
- • The lawsuit accuses hedge fund managers and Kentucky Retirement System (KRS) officials of mishandling the state's public employee pension fund, which operates at only 13 percent solvency—among the worst-funded state pension systems in the nation.
- • Cameron's intervening complaint adds new allegations involving the Kentucky Teachers Retirement System (KTRS), claiming Blackstone and Prism sold faulty investment products to the system, and asserts that CEOs of Blackstone and KKR personally enriched themselves through relationships with state pension funds.
- • The original case, filed in December 2017, alleges hedge funds siphoned money from Kentucky's pension trust by selling secretive, high-cost investment products to KRS trustees who were motivated to cover up and reverse the fund's financial deterioration through risky bets.
- • The revival of litigation by the state's chief law enforcement officer significantly strengthens the plaintiffs' position by overcoming the standing objection that defeated the previous complaint.
Summary
Kentucky Attorney General Daniel Cameron intervened in pension litigation on July 21, 2020, reviving a case that the Kentucky Supreme Court had dismissed earlier that month. The original lawsuit, Mayberry et al. v. KKR & Co., L.P. et al., was initially filed in December 2017 by retired State Policeman Jeffrey C. Mayberry and seven other Kentucky residents entitled to benefits from the Kentucky Retirement System. The state's highest court had ruled that the original plaintiffs lacked standing because they could not demonstrate concrete harm from the collapse of the pension fund. Cameron's intervention as a plaintiff and the expanded complaint overcome this procedural barrier and inject significant enforcement authority into the action.
The lawsuit addresses a critical fiscal crisis. Kentucky's public employee pension fund operates at only 13 percent solvency, placing it among the most severely underfunded state pension systems in the country. The core allegation asserts that hedge fund managers and KRS officials engaged in a coordinated scheme to mishandle pension investments. According to the complaint, hedge funds sold secretive, high-cost investment products to KRS trustees responsible for managing the fund. The plaintiffs contend that KRS employees, motivated by the fund's disastrous financial condition, were willing to pursue risky hedge fund strategies in hopes of recovery while these investments enriched the hedge fund operators at the expense of pension beneficiaries.
Cameron's expanded complaint introduces additional entities and claims beyond the original action. The new allegations implicate the Kentucky Teachers Retirement System (KTRS) and assert that Blackstone and Prism sold faulty investment products to that system as well. More significantly, the complaint alleges that the Chief Executive Officers of both Blackstone and KKR personally benefited from the financial relationships between state pension funds and their respective companies. By adding the state as an intervening plaintiff through the Attorney General's office, the case gains prosecutorial resources and standing authority that may overcome previous dismissal barriers, positioning it as a major enforcement action against prominent alternative asset managers.
The lawsuit addresses a critical fiscal crisis. Kentucky's public employee pension fund operates at only 13 percent solvency, placing it among the most severely underfunded state pension systems in the country. The core allegation asserts that hedge fund managers and KRS officials engaged in a coordinated scheme to mishandle pension investments. According to the complaint, hedge funds sold secretive, high-cost investment products to KRS trustees responsible for managing the fund. The plaintiffs contend that KRS employees, motivated by the fund's disastrous financial condition, were willing to pursue risky hedge fund strategies in hopes of recovery while these investments enriched the hedge fund operators at the expense of pension beneficiaries.
Cameron's expanded complaint introduces additional entities and claims beyond the original action. The new allegations implicate the Kentucky Teachers Retirement System (KTRS) and assert that Blackstone and Prism sold faulty investment products to that system as well. More significantly, the complaint alleges that the Chief Executive Officers of both Blackstone and KKR personally benefited from the financial relationships between state pension funds and their respective companies. By adding the state as an intervening plaintiff through the Attorney General's office, the case gains prosecutorial resources and standing authority that may overcome previous dismissal barriers, positioning it as a major enforcement action against prominent alternative asset managers.
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