HomeMy WebLinkAboutFIRE PENSION - 10/19/1987 - Fire Pension MINUTES OF BOARD MEETING
ELK GROVE FIREMEN'S PENSION FUND
OCTOBER 19, 1987
A Special meeting of the Firemen's Pension Fund was held on Monday, October 19,
1987 in the Village Conferance Room, 901 Wellington Avenue. The meeting was
called to order by President Walter J. Kriesant at 10:05 A.M.
President W. Kriesant stated all members of the Board had been contacted by
telephone and had agreed to attend except Village President C. Zettek and
Village Attorney G. Knickerbocker. The purpose of the meeting was to review
some investment activity.
ROLL CALL
On Roll Call the following members were present: Walter J. Kriesant, Patricia
S. Smith, George C. Coney, Charles B. Henrici, Harvey R. Speiden, Jerry L. Norris,
and Joseph Gardner III. In attendance was Hilda Ingebrigtsen, assistant finance
director.
REVIEW OF INVEST= ACTIVITY
Treasurer G. Coney reported he and Hilda had met with Birger Nyborg at their
request last friday to review a problem they had gotten us into and wanted to know
what we wanted to do about it. The problem being Birger Nyborg had invested 2
portions of $500,000.00 each of Ginny-Mae's 80. He had bought them on margin from
UMIC Inc. investment bankers. What we were doing was : UMIC purchased the 2
Ginny Mae's , in essance loaned us the money to buy them, then we pay UMIC
interest on that money. The way it would normally work: principal and interest
we would receive on the Ginny Mae's would exceed the interest we pay for the money.
Creating a positive cash flow. In the hope the market value of the Ginny Mae's
would rise and we would sell the Ginny Mae's without trading any of the $1,000,000.00
cash and make a substantial profit. Now the way the market has been , the way bond
prices have gone, the way short term interest rates have started to rise, we are
getting into a position now where the market value of the Ginny Mae's has declined,
the short term interest rates have increased so that now we have a negative cash
flow. We are paying more interest out to UMIC then we are getting in, in principal
and interest from the Ginny Maes. The market for Ginny Mae's is decreasing.
What Birger Nyborg.wanted us to do was sign a master re-purchasing agreement with
UMIC which would put us on the hook for the $1,000,000.00. Right now the market
value is around $835,000.00 approx. They were pressuring us to sign the UMIC but
we decided we weren't going to be pressured into it. The options they had presented
to us and what they wanted us to do was not viable. It also was against my personal
investment philosophy. So we said no , we would take it over the weekend, review
it with the Board and cane back with a recommendation.
Birger Nyborg gave us 4 options
1.) If we signed with UMIC and the market went down he would want the money (approx.
just under $1,000,000.00) Right now we owe $768,000.00(Sep.30) , 764,000.00(Aug) ,;
758,000.00(July) . We're losing approx. $4,000.00 per month.
2.) Use all our cash we have available, we gave to them, buy one off, keep _other,
sign reverse purchase agreement with UMIC.
3.) Get out from under the re-purchase agreement, put another $500,000.00 from the
Pension Fund to Birger Nyborg, and purchase both Ginny Mae's and hold on to them.
4.) Bite the bullet, call Birger Nyborg tell them to sell the Ginny Mae's on the
market. Pay off the re-purchase agreement $768,000.00 would produce '$71,000.00
(approx.) profit now. No, because we payed $244,000.00 on the front end. Net loss
$150,000.00 to $170,000.00 cash gone.
.' MINUTES OF BOAM MEETING
ELK GROVE FIREMEN'S PENSION FUND
OC'T'OBER 19, 1987
Page 2
Treasurer G. Coney reported he contacted J. DeMichael for more advice He is
with E.F. Hutton and former finance director of Decatur, Ill. Fire Pension Fund.
All three of us Hilda, George, and Joe DeMichael feel that buying onmarginif not
illegal it sure is questionable. At the least not prudent. It was a poor investment
and Birger Nyborg admits it was a poor investment and he shouldn't have been in it.
G. Coney, Hilda, and DeMichael feel we have 2 options.
1.) Not sign agreement, use other funds and buy the Ginny Mae's outright and hold
to maturity.
2.) Give a sell order today, sell out and take the $150,000.00 loss. (approx.)
Treasurer G. Coney recommended option #2 because we would minimize our loss and
we won't have to lose the interest on the $600,000.00 or $700,000.00 we would
have to put in now.
A discussion followed whether Birger Nyborg Co. had broken his contract with the
Board by not filing reports with us.
Motion by H. Speiden, seconded by J. Norris to follow the Treasurer's advice and
give a sell order today and inform Birger Nyborg notice of termination. Also we
do not intend to pay for the 90 day fee notice,of termination.
Roll Call Vote
W. Kriesant : Aye
P. Smith . Aye
G. Coney : Aye
C. Henrici : Aye
H. Speiden : Aye
J. Norris : Aye
J. Gardner : Aye
Motion passed unanimously. G. Coney was directed to inform Birger Nyborg Co. by
telephone and draft a letter to sell and notice of termination.
Motion by J. Norris , seconded by H. Speiden to purchase a new filing cabinet,
4 drawer, fireproof, and locking. Motion passed unanimously. G. Coney volunteered
to contact the Village Purchasing Agent.
Motion by C. Henrici, seconded by J. Norris to pay all expenses of Board members
wanting to attend IPFA Pension Seminar. Motion passed unanimously.
C. Henrici voiced his concern about rumors attributed to Board members about the
Disability Application of David Spung. A discussion followed.
ADJOURNMENT
Motion by H. Speiden, seconded by P. Smith to adjourn. Motion passed unanimously.
Meeting adjourned at 11:10 A.M.
Res tfully submi t�,
Joseph Gardner III, Secretary
Firemen's Pension Fund
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