The details are still a bit sketchy, but it is clear that attorneys representing the parties in Kentucky’s pension litigation will return to Franklin Circuit Court for a hearing in Tia Taylor, et al. v. KKR? & Co, LP, et al. on Monday after Judge Thomas Wingate gave the green light for the case(s) to proceed.?

In a nutshell, the case pits state pensioner Davids against hedge fund/private equity Goliaths in an action seeking damages “from some of the biggest names in finances,” based on alleged “breaches of fiduciary duty and other bad conduct in the sale and management of custom hedge funds” in relation to the woefully underfunded Kentucky state pension fund.?

The playing field has been leveled, at least to some extent, by the pensioners’ legal team —? led, writes finance and economics authority Yves Smith, “by Michelle Lerach, with her formidable and controversial husband, one-time top securities litigator Bill Lerach.” But for their dogged pursuit of the financial giants — against ostensibly overwhelming odds — the cases might have ended several years ago.?

In her blog “Naked Capitalism,” Smith writes: ?“After yet another long detour from the original case, Mayberry v. KKR, first filed in 2017 and now replaced by overlapping new actions, Judge Wingate has finally completed what must have been the painful process of evaluating the merits of a very large number of motions to dismiss.”

On May 1, Judge Wingate “issued orders on the extremely large number of motions to dismiss. The magnitude of that task, plus getting his arms around the very large body of past filings (generated before Franklin Circuit Judge Phillip Shepherd recused himself in 2022) presumably accounted for the substantial delay. The compact orders are well reasoned,” Smith writes. “They seem even more credible by rejecting the idea that the Attorney General could properly represent the Tier 3 plaintiffs, and denying the motions to dismiss of the hugely powerful defendants, KKR, Blackstone, PAAMCO, and private equity kingpins Henry Kravis, George Roberts, Steve Schwarzman, and Tomlinson Hill personally.”

“The stakes here are much higher than the potentially meaty recoveries. Private equity and hedge funds fetishize secrecy because, too often, their conduct will not stand up to scrutiny. The giant fund managers are almost certain to be most afraid of discovery, since the sharp practices they used with Kentucky Retirement Systems were very likely to have been replicated at other public pension funds. Even the limited discovery so far uncovered more misconduct and allowed the plaintiffs to add to their claims,” Smith writes.

Our interest in the culture of secrecy that pervades Kentucky’s pension system and the ensuing litigation — aimed, at least in part, at avoiding oversight and accountability — began with coverage in the late, great “Insider Louisville,” by reporter Joe Sonka, of the? retirement system’s refusal to comply with Senate Bill 2, enacted in 2017. That law required the retirement systems “to improve transparency regarding the administration of the (retirement) systems” by posting on its website the contracts for the investment managers of the Kentucky Retirement Systems (KRS) and the Teachers’ Retirement Systems (TRS).

Sonka reported that “nearly 100 contracts have not been posted to the pension plans’ respective websites, and many of those that have been posted are heavily redacted.” The retirement systems deferred to the predictably self-serving investment managers in determining what would and would not be posted — state law notwithstanding.?

A few years later, we were outraged by the refusal of the retirement systems, now reconfigured under the Kentucky Public Pension Authority umbrella, to release a copy of a $1.2 million taxpayer funded Calcaterra Pollack consultant’s report resulting from an investigation of “‘any improper or illegal activities’ in billions of dollars in hedge fund deals that led to the lawsuits alleging wrongdoing.”

In a scathing opinion, Franklin Circuit Court Judge Phillip Shepherd ordered release of the report. He reasoned:

“A full review of the Calcaterra Pollack report gives rise to questions as to whether the purpose and intent of the report was to fully expose all the relevant facts (and to determine if the KPPA and its employees made mistakes), or if the report was commissioned to cover up or minimize those mistakes in an effort to convince the (attorney general) to not pursue claims that could prove embarrassing to the current or former management of KPPA.”

“The public paid $1.2 million for this report,” Shepherd ruled, “(t)he public has a right to know its contents and decide if it got what it paid for.”

Secrecy? You bet! And that is why this complex litigation commands our attention.?

Plaintiffs/pensioners’ attorneys reacted swiftly to Judge Wingate’s May 1 orders rejecting defendants/financial investment monoliths’ slew of motions to dismiss.

Within days, pensioners’ counsel filed a motion for a hearing before Judge Wingate. Scheduled for 9 a.m. Monday, May 20, that hearing will, we understand, address at least in part pensioners’ motion for open proceedings and open discovery — that thing most vigorously resisted by defendants.?

By any measure, Monday’s hearing is the critical next step in determining what direction the litigation will take and to how much the public will be privy.?

Our minds return to the Boston Globe/STAT’s successful legal battle to unseal discovery in Kentucky’s Purdue Pharma OxyContin litigation in 2018.

Writing for the appellate panel in a 72-page opinion that resembled a treatise on public access to court records, but that was inexplicably depublished by the Kentucky Supreme Court, Judge Glenn Acree wrote:

“Kentucky’s presumption of public access to court records is broad because ‘every citizen and taxpayer has an interest in the manner in which the government is operated (and to) . . . determine whether public officials are properly fulfilling the functions of their office . . . ‘ Every claim of the Commonwealth against another, including the claim against Purdue, is the property of the people regarding which the public has a legitimate concern. On that basis, the right of access supersedes even the right to privacy (‘right of privacy does not extend to affairs with which the public has a legitimate concern.'”)

With the exception of the Purdue Pharma OxyContin litigation, we can conceive of no public issue in which Kentucky’s citizens and taxpayers have a greater — or more “legitimate” — interest and financial stake than Kentucky’s state pension. This fact clearly militates in favor of openness in the proceedings and records produced in discovery.