The Dallas Police and Fire Pension system has filed a lawsuit against its former financial consultants and an attorney alleging they all failed to sound alarms about the fund’s risky real estate investments.
The suit seeks to recover millions in fees paid to the Townsend Group, based in Ohio, and two of its principals, Richard Brown, of Colorado, and Martin Rosenberg, of Ohio, as well as Dallas attorney Gary B. Lawson.
Neither the Townsend Group nor Lawson returned phone messages left Friday.
“For years, Townsend allowed investment managers under its oversight to run amok, plowing DPFP funds into wildly inappropriate investments, disclaiming their statutorily-mandated fiduciary duties, and over-allocating funds towards investment in real estate,” the lawsuit states. “These actions caused DPFP to suffer losses and write-downs of nearly $580 million – losses on assets under Townsend’s oversight that should have been safeguarded for the benefit of Dallas’s loyal and hardworking police officers, firefighters, and their families.”
“Lawson failed to properly advise DPFP and the members of the DPFP Board responsible for administering DPFP, particularly in connection with a variety of real estate investments that were high risk, speculative, and not typically of the type pursued by pension systems,” the lawsuit states. “DPFP also is suing its former lawyer because he lost sight of who his client was, and he failed to properly advise and protect his actual client.”
The Dallas Police and Fire Pension System nearly collapsed earlier this year under the weight of years of risky real estate investments.
This past legislative session, city leaders and state lawmakers reorganized the pension system, which is beginning to recover. Meanwhile, Dallas police and fire employees had been retiring and quitting in near record numbers over concerns over their retirement benefits.
The pension fund hired Townsend in 2001, the lawsuit states. They oversaw CDK Realty Advisors, which managed the largest percentage of the pension fund’s nearly $1 billion real estate portfolio, the lawsuit states.
In 2015, the pension fund fired CDK after speculative real estate investments in Idaho, Hawaii, Phoenix and Napa Valley, CA lost millions, the lawsuit states. The pension system recently settled with CDK for $2 million, according to published reports.
The pension fund fired Lawson in December 2015. The fund fired Townsend in February 2016.