Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, April 18, 1993 TAG: 9304180050
SECTION: VIRGINIA PAGE: D-4 EDITION: METRO
SOURCE: By Associated Press
DATELINE: RICHMOND LENGTH: Medium
FEDS STARTED VRS PROBE
Federal authorities began a criminal investigation of the Virginia Retirement System last fall, a newspaper reported Saturday.The Richmond Times-Dispatch quoted legal and political sources who said the federal investigation into controversial real estate and legal transactions was ordered by then-U.S. Attorney Richard Cullen.
The newspaper's sources described the federal investigation as open-ended and ongoing. But the sources cautioned that there was no indication whether Cullen's successor, yet to be named by the Clinton administration, would continue the probe.
Cullen, a Republican, was among 93 Reagan- and Bush-appointed prosecutors dismissed last month by Attorney General Janet Reno.
Cullen, now in private practice in Richmond, declined comment and referred all questions to his interim successor, Kenneth E. Melson, who said, "I have nothing that I can share with you."
The chairwoman of VRS, Jacqueline Epps, and Mark T. Finn, head of the fund's investment committee, did not return the newspaper's telephone calls to their homes and offices.
Telephone calls from The Associated Press on Saturday also were not returned.
The VRS administers $14.2 billion in pensions for state employees. It is a state agency whose top administrators are appointed by the governor.
According to the newspaper, the federal probe began shortly after a probe by former Attorney General Mary Sue Terry concluded the retirement system and its real estate arm, RF&P Corp., broke no laws.
Pamela Womack, spokeswoman for Terry's gubernatorial campaign, said she had "no knowledge" of any federal probe. Terry resigned as attorney general in January to campaign full time.
Terry's interim successor, Stephen Rosenthal, declined comment.
Terry's monthlong inquiry in November looked at a variety of business practices and deals negotiated by RF&P and VRS board members.
She found no evidence of illegal conduct but concluded that VRS and RF&P were unnecessarily secretive and sloppily managed. She also said VRS violated its own procedures by paying legal fees through company accounts, apparently to bypass her restrictions on the use of outside lawyers.
The federal investigation would be the latest twist in an increasingly complex financial, political and legal drama. The drama started in 1990, when Gov. Douglas Wilder blocked a stock-and-cash offer from CSX Corp. for the state's shares in RF&P and set in motion the VRS takeover of RF&P.
Federal investigators reportedly were concerned about the governance of the retirement system, stock transactions, bookkeeping and the VRS' relationship with RF&P. RF&P is a former railroad acquired in 1991 for nearly $548 million.
Terry's investigation led to a political and legal feud with Wilder. He tried in December to fire her as counsel to VRS, but was blocked by a Richmond Circuit Court judge. Wilder is appealing to the Virginia Supreme Court.