Last Thursday, the board of trustees of the Arlington Employee’s Retirement System announced that fund administrator Bruce Kallos was being suspended, with pay, for possible misuse of retirement fund credit cards.
“There are expenditures for meals, for instance, where we don’t know who was along with him,” said Steve Ivins, president of the board that oversees the main retirement fund for county employees.
“There are rental car charges. … There are some hotel bills that have charges for parking for a car, but we don’t have a rental car receipt,” said Ivins. In addition, the board is investigating whether Kallos improperly charged trips to Delaware.
Kallos did not return calls for comment made to his home and to a cell phone on Friday.
AN INVESTIGATION of one year’s worth of credit card charges should be completed in August. When the retirement board next meets on Aug. 5, members will decide Kallos’ fate.
“Clearly there’s some items that make us uncomfortable, but it is a board decision,” Ivins said. “We [may] need to think long and hard about it.”
The questions over use of business credit cards casts an unfortunate cloud on Kallos’s term since 1995 as fund administrator, Ivins said.
“We’ve done so well under his leadership, on the investment side. We’re one of the better-run funds in the country,” he said.
DISCOVERY OF the credit card charges came in April, Ivins said, as the board’s treasurer looked through business bills before paying them. “The treasurer said to me he had some questions about the [American Express] bills and the lack of receipts,” said Ivins.
None of the charges are inherently incriminating, he said, but do raise questions. There are hotel room charges, with no itemized receipt, Ivins said, which would let the treasurer determine that all charges were legitimate.
Hotel parking fees have also raised questions. “Twenty dollars a night to park is often enough for me not to take a car,” he said. “On the other hand, if he drove to a meeting, and we didn’t have to pay for airfare or trainfare, it could be a wash.”
The board discussed the matter in May, asking members of the personnel committee to review the bills. This month, the board asked County Comptroller Barbara Liechti, also the retirement system board’s new treasurer, to conduct an audit of credit card bills going back to July 2003.
“There are enough questions, we need to have somebody trained as an auditor take a deeper look,” said Ivins.
OTHER QUESTIONS EXIST about trips Kallos took to Delaware. He and his wife own a house in Wilmington, Del., while Kallos maintains a condominium in Arlington. Trips he took between the two — charged to the retirement system’s credit cards — have raised concerns as well.
“There is a pattern, several times a year, of leaving the office on Friday, by Amtrak, and coming back Monday by Amtrak,” Ivins said.
Again, he said, there could be good reasons to charge those trips. One of the retirement system’s investment consultants also lives in Wilmington, Del. Trips to meet that consultant are a legitimate business expense, Ivins said. “If he left Tuesday morning and came back Tuesday night … that would be OK. But when it’s over the weekend, we need to take a look.
Altogether, Ivins said, “we’re talking about a smaller amount.” The $1 billion retirement fund budgeted $5.7 million for operating expenses for the last business year, and only $38,000 of that was allocated for travel.
AT THEIR NEXT meeting on Aug. 5, members of the retirement fund’s board of trustees will hear from Liechti regarding what she has turned up in an audit of the credit card charges — whether the Delaware trips, meals and hotel parking fees were legitimate, or whether the fund could demand repayment.
“I hope it will be final report,” Ivins said. “We do not wish to push the auditor to make hasty conclusions.”
That shouldn’t be the case, Liechti said. “It’s on a fast track,” she said.
In addition to a report on the credit card charges, Liechti said she will make recommendations about how to tighten fund regulations on the use of credit cards.
“They have taken a number of steps already,” she said. “In June, the trustees required the executive director to follow the county’s travel policies. Under those policies, which are stricter, travel is pre-approved.”
Liechti has conducted similar audits on departments in county government, following the discovery in March that Rob Moyer, an employee in the county Commissioner of Revenue’s office, had been filing false credit card reimbursement forms for years.
After that discovery, county government has carried out audits in the county treasurer’s office, the Commissioner of Revenue’s office and one other county department. In coming years, Liechti said she will audit every county division and department.
“I think all payment mechanisms need to be watched carefully,” she said.