County Investment Guru Resigns Amid Scandal

David Deutsch, the county pension fund's chief investment officer, has just handed in his resignation effective March 19 and the San Diego County Employees Retirement Association board accepted it, according to our media partner

Garry Sobeck, the chairman of SDCERA's board, made the announcement after a closed session meeting Thursday morning.

Deutsch, who has served as CIO for SDCERA since 2004, was the architect of the county pension fund's current controversial hedge fund investment strategy.

The Wall Street money managers who handled investments for San Diego County's retirement system have been charged with securities fraud.  Prosecutors said they diverted hundreds of millions of dollars from their clients' portfolios to maintain lavish lifestyles.

County retirement officials said the system had $78 million invested in Greenwich, CT-based WG Trading. San Diego cut ties with the firm Dec. 3, but since they hadn't given six months' written notice, they couldn't get that money back.  Now, any recoveries will be up to the courts.

WG Trading's principals, Paul Greenwood and Steven Walsh, were arrested last month by federal authorities in New York.

According to a criminal complaint, $1.3 billion that WG Trading firm had under its management for 16 'institutional investors' was illegally shifted into personal accounts linked to Greenwood and Walsh over the past two years.

Investigators cited purchases of swank estates, horse farms, cars, expensive collectibles -- and alimony payments.

Besides the San Diego County Employee Retirement Association (SDCERA), WG Trading's clients reportedly included public employee retirement systems in Sacramento and the state of Iowa, along with the University of Pittsburgh, Carnegie Mellon University and some charitable foundations.

San Diego County's retirement system listed WG Trading as so-called Alpha Engine advisers on hedge funds and supposedly risk-free "index arbitrage" investments.

Investment specialists said WG saved the system money on "performance fees."

"There's a whole variety of these cases -- huge frauds -- which in my experience is unusual, to have so many of them hitting at the same time," said San Diego attorney Michael Lipman, a former federal prosecutor who now specializes in white-collar defense cases.

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