Fired IPERS official says state board was fed false information

A former investment officer with the Iowa Public Employees’ Retirement System alleges he was wrongly fired after reporting the state’s pension system was routinely overstating its performance, concealing certain expenses and understating its investment risk.

Rich Wiggins is suing the State of Iowa in Polk County District Court, claiming wrongful discharge and violations of the state’s False Claims Act.

According to the lawsuit, Wiggins was hired by the State of Iowa in June 2022 as the investment risk and operations officer for the Iowa Public Employees’ Retirement System. In that role, Wiggins replaced Sriram Lakshminarayanan, who moved into the role of IPERS’ chief investment officer.

According to the lawsuit, Wiggins was the head of risk and strategy for Saudi Aramco, the second largest company in the world, before joining IPERS.

Wiggins’ duties as IPERS’ investment risk officer included risk management and monitoring the performance of IPERS’ $40 billion investment portfolio. One of his other duties, according to the lawsuit, was to monitor the conduct of Lakshminarayanan — although Lakshminarayanan had the authority to terminate the employment of Wiggins without cause.

In his lawsuit, Wiggins states that he was “tasked with ensuring that IPERS did not become the next Pennsylvania State Employees Retirement System.” In 2021, Pennsylvania’s largest pension fund was at the center of a large scandal and criminal investigation that was tied to the overstatement of its yearly investment returns.

Shortly after Wiggins was hired, Lakshminarayanan allegedly attempted to move Wiggins to a different role, reportedly explaining that “we don’t need a risk officer because we don’t have any risk.”

The lawsuit alleges that assertion was false in that IPERS has more private equity, hedge funds and leveraged products than a typical pension fund, and thus has more risk.

“Wiggins soon discovered that the pension system’s reporting was riddled with errors,” the lawsuit alleges. The three biggest problems, according to the lawsuit, were IPERS’ risk reporting, a benchmarking process intended to measure returns on investments, and the understatement of management fees and expenses.

Lawsuit: State board given ‘false’ information

In the fall of 2022, the lawsuit alleges, Wiggins shared with Lakshminarayanan his concerns about IPERS’ investment and bookkeeping practices. He also shared data with colleagues who are experts in the field and, according to the lawsuit, they, too, believed IPERS’ measure of risk appeared to be flawed and did not represent a true measure of actual risk.

In October 2022, Wiggins authored a memo suggesting that IPERS bring in an outside consultant to verify its risk calculations. Although the memo allegedly generated no response, Wiggins then began regularly informing Lakshminarayanan that the output of the risk calculations appeared incorrect and could not be verified. Some of the risky strategies employed by IPERS would lead to the fund “doing especially badly in poor market conditions,” the lawsuit claims, adding that Lakshminarayanan and IPERS CEO Gregory Samorajski “engaged in multiple strategies to make it appear that IPERS funds were doing better than they actually were.”

Wiggins alleges Lakshminarayanan and Samorajski presented information to the state’s Investment Board that was misleading — in part by concealing fees that were paid by burying them within transactional costs so they could not be itemized.

Lakshminarayanan and Samorajski submitted the “false information” to the board and then asked for additional compensation in the form of bonuses, the lawsuit alleges.

“IPERS is, in fact, paying egregiously high fees,” the lawsuit claims. “The benchmark goals for the fund were manipulated to make it appear the fund is doing better than it truly is. The benchmark is designed to be just below the returns that are reported. A huge swath of the portfolio is benchmarked directly to itself so it is impossible to underperform.”

The lawsuit claims this “surreptitious use of easy-to-beat benchmarks” by which IPERS’ investment performance was measured was “at best, a form of engineered outperformance and, at worst, rank intentional misrepresentation.”

On Feb. 2, 2023, Wiggins was fired after just seven months on the job, the lawsuit alleges, adding that the reason he was given at the time was that he was “a bad fit” for IPERS.

IPERS did not replace him, the lawsuit claims, so currently there is no investment risk officer. “In effect, (Lakshminarayanan) acts as the risk officer, which is contrary to best practices,” the lawsuit alleges.

As part of his lawsuit, Wiggins claims that by attempting to get IPERS to accurately report risk, fees, and investment performance to the board and to the public, he was attempting to bring an end to violations of the state’s False Claims Act. The state, he alleges, “retaliated” against him by firing him.

The lawsuit also alleges his termination was ran counter to public interest in that his “pointing out irregularities concerning risk and risk reporting” was intended to support the state’s pension system and its statutory goals.

The State of Iowa has yet to file a response to the lawsuit. A spokesperson for the Iowa Attorney General’s Office did not respond to requests for comment on the matter.

State records indicate that in 2024, Lakshminarayanan was paid $351,184 in salary, and that Samorajski was paid $239,950.

According to IPERS, Lakshminarayanan has a bachelor’s degree in mechanical engineering from Pondicherry University, India, and a master’s degree in industrial and manufacturing systems engineering from Ohio University.

This article first appeared in the Iowa Capital Dispatch.