Key Takeaways
- • A Dallas County jury found former investment consultant Townsend Financial and former attorney Gary Lawson not guilty on every charge of legal violations, awarding the Dallas Police & Fire Pension System (DPFP) zero dollars in damages.
- • The jury found DPFP, CDK Realty Advisors, and Lawson negligent on some questions, attributing 75 percent of the fault to the pension fund itself for failing to properly monitor its own assets.
- • DPFP alleged Townsend's advice cost the system $1.2 billion, with Boise, Idaho real estate investments through CDK Realty Advisors producing losses of more than $133 million.
- • DPFP is under 50 percent funded, with over $2.5 billion in unfunded liabilities owed to nearly 11,000 members, and would need 55 years at its current payment rate to clear its debts.
- • Townsend denied all charges, argued the statute of limitations had expired, and called DPFP's political-subdivision exemption argument "nonsensical."
Summary
The Dallas Police & Fire Pension System lost its jury trial and appeal seeking restitution from Townsend Financial, a former investment consultant the pension accused of providing poor advice that cost it $1.2 billion, according to thetexan.news. The suit, filed in 2017 in Dallas County District Court, also named Gary Lawson, the pension's former attorney, on similar negligence claims. The jury found Townsend and Lawson not guilty on every charge of legal violations and awarded zero dollars in damages. The court did find DPFP, CDK Realty Advisors, and Lawson negligent on a couple of questions, and attributed 75 percent of the fault to the pension for not properly monitoring its own assets.
DPFP's original filing asserted that Townsend failed to advise diversification to minimize the risk of large losses, failed to assess the value added by investment managers, and failed to disclose material information. The pension alleged that under Townsend's guidance its assets were placed heavily in "high-risk, speculative, and undiversified investments," particularly real estate. Much of the losses stemmed from real estate in Boise, Idaho, managed through CDK Realty Advisors, which the pension said Townsend was tasked with overseeing. Losses of more than $133 million were tied to Boise-area investments, with additional losses in Dallas, Phoenix, Arizona, Hawaii, and California. The relationship began in 2001, was renewed in 2013, and was terminated in 2016 after the problems came to light. Townsend was paid over $2.5 million by DPFP over that period.
Townsend categorically denied the charges and argued that the statute of limitations had passed, calling DPFP's argument that it is a "political subdivision" exempt from that limit "nonsensical." Townsend blamed the recession of the late 2000s and early 2010s for the losses and pointed to DPFP's own negligence, noting the pension waited about 10 years before suing.
The fund's financial position remains weak. DPFP is one of 15 local Texas pensions funded below 50 percent, with over $2.5 billion in unfunded liabilities. At its current payment rate, the fund would need 55 years to pay off its debts. DPFP is also pursuing a separate suit against the City of Dallas over alleged missed payments of $2 million into the pension; that case was dismissed by the U.S. District Court for the Northern District of Texas and is on appeal before the U.S. Fifth Circuit Court. A pension attorney declined to comment beyond saying the fund is "looking forward to the Fifth Circuit appeal" and that it had made "prudent changes" to its policies to prevent future losses.
DPFP's original filing asserted that Townsend failed to advise diversification to minimize the risk of large losses, failed to assess the value added by investment managers, and failed to disclose material information. The pension alleged that under Townsend's guidance its assets were placed heavily in "high-risk, speculative, and undiversified investments," particularly real estate. Much of the losses stemmed from real estate in Boise, Idaho, managed through CDK Realty Advisors, which the pension said Townsend was tasked with overseeing. Losses of more than $133 million were tied to Boise-area investments, with additional losses in Dallas, Phoenix, Arizona, Hawaii, and California. The relationship began in 2001, was renewed in 2013, and was terminated in 2016 after the problems came to light. Townsend was paid over $2.5 million by DPFP over that period.
Townsend categorically denied the charges and argued that the statute of limitations had passed, calling DPFP's argument that it is a "political subdivision" exempt from that limit "nonsensical." Townsend blamed the recession of the late 2000s and early 2010s for the losses and pointed to DPFP's own negligence, noting the pension waited about 10 years before suing.
The fund's financial position remains weak. DPFP is one of 15 local Texas pensions funded below 50 percent, with over $2.5 billion in unfunded liabilities. At its current payment rate, the fund would need 55 years to pay off its debts. DPFP is also pursuing a separate suit against the City of Dallas over alleged missed payments of $2 million into the pension; that case was dismissed by the U.S. District Court for the Northern District of Texas and is on appeal before the U.S. Fifth Circuit Court. A pension attorney declined to comment beyond saying the fund is "looking forward to the Fifth Circuit appeal" and that it had made "prudent changes" to its policies to prevent future losses.
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