Pension CIO’s New Post Raises Eyebrows

Tony Johnson has resigned as chief investment officer for the $4 billion City of Philadelphia Public Employees’ Retirement System to become a managing director with private equity consultancy Franklin Park.

Moves from the public to private sector are hardly unusual, although this new job has come under scrutiny because Johnson helped steer Philadelphia toward a consulting contract with Franklin Park in mid-2003.

That contract has been a source of controversy ever since it was signed. Philadelphia’s request for proposal (RFP), managed by Cooper Consulting, stipulated that applicants must have been in business for three years with a solid track record. Franklin Park, however, only had been formed a few months earlier by a sextet of former professionals from Hamilton Lane, which was Philadelphia’s incumbent private equity advisor.

Bradley Atkins, CEO of Franklin Park and former head of research for Hamilton Lane, said at the time that even though his firm was new, the team had worked together and, in particular, worked with Johnson and Philadelphia. “We worked with Tony Johnson and his staff for a few years while we were at Hamilton Lane,” Atkins told PE Week in a 2003 interview. “I personally worked with Tony when he first joined Philadelphia and I helped teach him about private equity.”

The ultimate result was a four-year consulting contract for Franklin Park, which still raises some eyebrows at Hamilton Lane. “Why have RFP requirements if you don’t have to meet them?” one source within the firm rhetorically asks.

The source did not accuse Johnson and Franklin Park of orchestrating a contract for future employment, but did call the situation “distasteful.”

A spokesman for Philadelphia Mayor John Street says that Johnson complied with regulations, and that his move did not constitute a conflict of interest. Neither Johnson nor Atkins responded to repeated requests for comment.

Like many public pensions, the Philadelphia system operates under a conflict of interest law that would prevent Johnson from working on city business for the next year. Instead, he’ll focus on other clients, such as the Overseas Private Investment Corp. Most states and municipalities also have certain disclosure requirements, such as having to inform higher-ups of beginning employment discussions with companies with whom the system has existing business.

Frank Fernandez, for example, has an extensive paper trail from when he left the Florida State Board of Administration in 2004 to take a job with Florida consultant Alignment Capital. Same goes for Barry Gonder, who left the California Public Employees’ Retirement System to work for CalPERS advisor Grove Street Advisors.

“If you look back at my history, I was obsessed with managing it properly,” says Fernandez, who since has left Alignment to launch Gateway Private Capital. “Each entity has its own rules, but the key in all cases is to have good disclosure.”


Matthew Sheahan contributed to the reporting of this story.