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Retirement Board solicits audit of Fund on suspected misconduct and poor performance

A “full in-depth Investment Management Review” of the American Samoa Government Employees Retirement Fund (ASGERF) will involve two separate types of audits, according to a letter written by the Utah-based registered investment advisor company, Paragon Wealth Management.

 

This was revealed in a letter to Retirement board chairman Fanene Morris Scanlan from Paragon Wealth Management President, David Young, that was leaked to Samoa News.

 

The letter, which is a response to the Board’s ‘solicitation’ for their services, indicates that two separate audits would be involved — one of the fund’s performance due to its status dropping to 63.5% and the other into the suspected misappropriation or fraud allegations.

 

According to Young, their audit team would look at the “funds current predicament and the possible solutions to help the fund,” and outlines his company’s scope of work.

 

He further notes that “included with this letter will be a separate Engagement Proposal from an accounting firm that we have worked with in the past. As an investigator, their role will be to carry out a full review and examination of transactions within specific accounts related to the administration of the Retirement Fund that may be suspected of misappropriation or fraud. They are an independent firm and not affiliated with Paragon Wealth Management in any way.”

 

Last month, Fanene made allegations against the ASGERF Executive Director, Luatua Filisouoaiga Taafua about “questionable transactions,” over the use of the Chairman’s signature rubber stamp for checks issued out of the Administrative Account without the proper authorization, as well as other suspect transactions done by Luatua in his role as the fund’s executive director.

 

At the time, the Board was said to have also asked Police Commissioner Save Liuato Tuitele to conduct an investigation into the matter, and that they were seeking an off-island audit of the fund to look at the suspected misappropriation or fraud by Luatua, who is currently on annual leave for 30 days, while the matter is being reviewed.

 

The letter from Paragon Wealth Management, a registered investment advisor (RIA) located in Provo, Utah, says “proper management of the ASGERF is vital for the financial security of current and future retirees, and the 2014 financial report of the retirement fund, shows that the Funded Status has dropped to 63.5%” and “is of great concern to all involved.”

 

The RIA says the purpose of their work would be “to provide you with information as to the causes of the fund’s current predicament and the possible solutions needed to help the fund return to a more appropriate financial condition.”

 

Young then outlines the scope of work his team of auditors would conduct which “will analyze the Fund’s performance and measures the sources of value added to the portfolio.”

 

“It will compare the performance of the retirement fund against the performance of the broad investment markets and other retirement funds.

 

“It will help determine the efficacy of the fund’s investment advice and management. It will make recommendations on the portfolio management process and possible allocation changes for the fund moving forward,” the Paragon Wealth Management President stated.

 

Young said they will also evaluate the other three key factors that affect the stability of the fund, and pointed out that they “may need to engage an actuarial firm to assist with some of these numbers depending on how deep we need to go.”

 

These areas are: Contributions, Distributions of Benefits Paid Out and Administration and Oversight Costs.

 

COST

 

According to Young, it is difficult to project total costs because they do not know for certain how much time it will take.

 

“Our billings rates vary between $90 and $285 per hour depending on who is doing the work. We estimate that the cost for this job will be between $24,000 to $29,000 for actual time spent. If the scope of the engagement is reduced before completion then we will reduce the cost accordingly,” he said.

 

Young’s letter also indicated that the Retirement Office will also be charged for travel, food, lodging in addition to the hourly costs. Invoices for work completed or cost incurred will be submitted at the end of each month. Young assured Fanene that they will do their best to keep costs down whenever possible.