Milwaukee Pension Boards Ask Managers to Consider Buying Midwest Stock

The three pension funds Milwaukee County Board Chairman Lee Holloway said could purchase Midwest Airlines stock are governed by rules that, to varying degrees, would impede the acquisition.

"Legally, we have no basis of doing that and I don't believe we can direct our money managers to do that," said Milwaukee Comptroller Wally Morics, who is chairman of the city of Milwaukee's Annuity and Pension Board. "The (pension) trust is legally there for the sole purpose of the beneficiaries. "

On Jan. 29, Holloway proposed the city of Milwaukee Pension Board, Milwaukee County Pension Board, and State of Wisconsin Investment Board order their investors to purchase Midwest Airlines stock so they could oppose AirTran Airways' takeover bid.

"Those boards have a vested interest to keep Midwest independent and based in Milwaukee and would vote in the best interests of the public, while retaining a reasonable rate of return," Holloway wrote to Milwaukee Mayor Tom Barrett, Gov. Jim Doyle and Milwaukee County Executive Scott Walker.

The idea of investing in Midwest for the best interests of the Milwaukee public contradicts the laws that created each of the pension funds. All three have regulations saying the money can be invested only for the benefit of the employees receiving the retirement benefits. So, regardless of what the funds' governing boards say, the final decision lies with the investment analysts.

Direct investments prohibited

County Executive Scott Walker said his administration has made moves to insulate the Pension Board from politics as much as possible since the pension scandal that led to his election in a recall vote.

"We put some pretty major firewalls up," he said. "When you are dealing with a retirement system, there is an inherent fiduciary obligation to act in the best interests of those funds. "

The city of Milwaukee Pension Board, which Holloway said could buy 1 million shares, is prohibited from making direct investments, Morics said. All investment decisions are made by independent money managers.

At the state level, a portfolio manager at the board's personal trading room would have to independently decide to consider

Midwest, and then analyze the stock to figure out if it would produce a good return, said Public Information Officer Vicki Hearing. Since the board plans to hold onto its stocks for a long time, the analyst would need to conclude that Midwest's stock would be lucrative for the duration.

Members of the county's Pension Board were to have an informal meeting Monday to discuss whether to consider the Midwest idea at their next meeting.

Not city, county role

Milwaukee Mayor Tom Barrett remains supportive of Midwest's current local management but wasn't warm to Holloway's idea, said spokeswoman Eileen Force.

"We want Midwest to remain the hometown airlines," she said. "We won't be taking any pension advice from Lee Holloway. "

County Board Public Information Officer Harold Mester said that, regardless of the plan's feasibility, Holloway is trying to generate discussion over the Midwest-AirTran situation.

"He is really the only one out there who has come forward with anything else than their love of Midwest Airlines," Mester said. "We were hoping that this would start some kind of process, that maybe this would evolve into something else, and so far it hasn't. "

Walker's response was that Midwest's conflict is between the shareholders, and that the county is providing all the support it can through its many recent renovations to General Mitchell International Airport. He noted that later this year, Midwest and Skyway Airlines will move into the new Concourse D.

"We don't have to create a new one (plan) because we are doing everything we can," Walker said. "Unless it's something Midwest is asking us to do in regards to their shareholders, it's really losing sight of what we can do here. "

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