Jul. 17--Consulting Services Group, a Memphis-based investment advisory company, has warned the Shelby County government that the firm may be sued by the SEC.

The company gives advice to the county on how its pension fund should be invested. The Securities and Exchange Commission's New York regional staff may recommend the filing of a civil lawsuit against the company as part of an ongoing corruption investigation in that state.

The company said in a June 30 letter to the county that it hasn't done anything wrong.

"Let us be perfectly clear: CSG did not pay any kickbacks to obtain business from the (New York retirement fund) or any other pension fund," the letter states.

The SEC alleged this year that powerful New York officials pushed CSG to pay a fee of $1.15 million to a top political adviser named Henry Morris in exchange for winning a contract to manage $765 million of New York state pension funds.

CSG wasn't charged, but was named as one of the firms that gave in to pressure to pay kickbacks.

The letter says CSG signed a deal with Morris, an employee of Searle & Co., to act as a placement agent and paid him according to industry practice.

"Paying fees to placement agents like Searle in exchange for introductions and assistance in the solicitation of businesses has been a common practice in the public pension fund industry, and was appropriate so long as those fees were disclosed to the fund, as they were in this case," according to the letter, signed by CSG's president Brian Jones and by CEO Lee Giovannetti.

They argue that the government appears to be attacking the general industry practice of paying fees to people who have access to public decision makers, rather than attacking anything that's unique to CSG.

The letter comes as Shelby County Mayor A C Wharton has asked the county retirement board to reconsider its relationship with CSG, which provides advice on how the county pension fund should invest its roughly $731.6 million in assets. Members are set to vote on the issue at a meeting Aug. 4.

News coverage in publications like Forbes magazine drew attention to the company's financial relationships with the companies in which it invests its clients' funds and raised questions among some in the county.

However, CSG's defenders spoke out in its favor at a meeting this month, and the pension board may give the company another chance.

Memphis Light, Gas and Water Division also has a contract with CSG, though it's more limited than the county's.

--Daniel Connolly: 529-5296

-----

To see more of The Commercial Appeal or to subscribe to the newspaper, go to http://www.commercialappeal.com.

Copyright (c) 2009, The Commercial Appeal, Memphis, Tenn.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

A service of YellowBrix, Inc.