The Issue — Up to $100M in Pension Fund Exposure Authorized Without Independent Analysis

The instrument

What is this investment?

The bonds under investigation are non-marketable foreign sovereign debt — direct loans to a foreign government, sold exclusively through a single for-profit broker-dealer (FINRA CRD# 11148). Unlike U.S. Treasury bonds and most other fixed-income securities, they have three critical features that matter for pension fund managers:

No secondary market. These bonds cannot be sold or traded before maturity (per the bond prospectus — a characteristic of the instrument, not a FOIA finding). A pension fund that purchases them is locked in — unable to exit the position if conditions change, if better opportunities arise, or if the fund needs liquidity.
Declining credit quality. All three major rating agencies — Moody’s, S&P, and Fitch — have downgraded the issuing country’s credit rating since 2024, specifically citing economic instability and heightened security risks. These bonds carry more risk than many comparable alternatives with similar interest rates.
Sold by a for-profit broker-dealer with special regulatory accommodations. The bonds are sold exclusively by a for-profit New York corporation registered with FINRA (CRD# 11148) since 1955. The broker-dealer’s sole shareholder is a not-for-profit controlled by the issuing government, which controls the appointment of the broker-dealer’s CEO — currently a former Knesset member and cabinet minister. In 2000, FINRA’s predecessor (NASD) granted this broker-dealer special accommodations regarding customer suitability requirements, noting from the regulatory record that the firm’s customer base is “basically limited to those who have some religious, cultural or ideological affinity for Israel.” The broker-dealer has three regulatory enforcement events on its FINRA record. When state pension funds rely on the broker-dealer’s own sales materials as their investment analysis, they are relying on a for-profit seller operating under reduced regulatory scrutiny — not an independent financial advisor.

In practical terms: an Arkansas pension fund that buys these bonds is accepting less liquidity and more risk than it would with many other available fixed-income investments. The question is whether that trade-off was made based on sound financial analysis.

The exposure

What’s happening in Arkansas?

Two Arkansas pension boards have authorized substantial new exposure to non-tradable sovereign bonds. The State Treasury — a separately governed state office, not a pension fund — also holds a position in the same instruments:

Agency	Amount	Portfolio Share	Date
ATRS (Arkansas Teacher Retirement System)	Up to $50 million authorized; full amount deployed Dec 2025	~0.2% of $23.7B	June 2, 2025
APERS (Arkansas Public Employees’ Retirement System)	$25–50 million authorized; purchase confirmed by Nov 2025	~0.2–0.4% of $11.58B	May 15, 2025 (subcommittee); June 11, 2025 (full board)
State Treasury (separately governed)	$55 million in holdings (including $20M purchased since May 2025)	~0.5% of $11B	Ongoing since 2017

(Note: The pension authorizations total up to $100 million combined. APERS authorized up to $50M but had not yet purchased as of July 2025 per FOIA records. The Treasury’s $55M position is governed by separate Treasury investment authority and is shown here for context — it is not within the scope of the Pension Investment Transparency Act, which by its terms applies only to pension benefit plans.)

While the portfolio percentages are small, the question is whether standard fiduciary process was followed — not whether the amounts are material.

These authorizations came in rapid succession — and under circumstances that raise questions about process:

In late 2024, Steve Pulley, a senior investment manager in the State Treasurer’s office, wrote an internal memo advising against new sovereign bond purchases, citing credit-rating downgrades by major rating agencies. The memo recommended the state “hold our positions and allow for the $17M to roll off.”
On April 11, 2025, State Auditor Dennis Milligan personally scheduled a two-day pitch tour for the bond issuer’s sales executives — arranging four meetings in 18 minutes with the heads of APERS, ATRS, and the Treasury, all in his own Capitol office (Room 230), all staffed by his deputy Jason Brady. (See evidence finding 3e) The Auditor has no investment authority over any of these funds, yet convened every decision-maker who would need to approve the purchases.
Within weeks, the Treasury purchased $20 million in new bonds, and both pension boards voted to authorize up to $100 million more in combined sovereign bond investments.

July 2025: Two months after APERS’s board authorized $25–50 million, Executive Director Amy Fecher confirmed no bonds had been purchased: “Still zero for APERS.” Staff were still establishing contact with the issuer’s representatives the next day.

September 2025: ATRS formalized its sovereign bond approach through Reams Asset Management, establishing written investment guidelines for what the account documents call an “Israeli Jubilee bond account” — four months after board authorization.

November 2025: APERS received its first sovereign bond statement, confirming a purchase had eventually occurred after the months-long delay.

December 2025: ATRS Deputy Director Rod Graves confirmed in a routine board liquidity update that the full $50 million sovereign bond mandate had been funded through the Scout (Reams) account — completing the cycle from board authorization (June 2) to investment guidelines (September 25) to deployment (December 2025) without an independent credit analysis at any stage.

February 2026: Second round of FOIA responses received from Treasury (118 documents), APERS (16 documents including an 8,648-page production), and ATRS (7 documents, partial response). Total investigation corpus reaches 1,098 documents; Auditor of State Round 2 response pending.

March 3, 2026: Auditor of State delivers Round 2 response — 124 documents from three custodians (Dennis Milligan, Jason Brady, Wendy Spadoni) via flash drive from General Counsel TJ Fowler. Investigation corpus reaches 1,222 documents across four agencies, two FOIA rounds.

March 28, 2026: ASHERS (Arkansas State Highway Employees’ Retirement System) delivers Round 3 response — 5 documents revealing the bond issuer’s national sales leadership pitched ASHERS through the same April 2025 tour, but ASHERS declined to invest. ASPRS (Arkansas State Police Retirement System) confirms no responsive documents — assets commingled with APERS under Act 1242 of 2009. Investigation corpus reaches 1,227 documents across three FOIA rounds.

April 9, 2026: LOPFI (Local Police and Fire Retirement System) confirms no responsive records and no current holdings of the bonds under investigation. LOPFI manages its own investments independently with approximately $3.15 billion under management; no documentation of contact with the bond issuer. With LOPFI’s response, five of six Arkansas pension systems had responded.

May 8, 2026: AJRS (Arkansas Judicial Retirement System) identified as the sixth Arkansas pension system covered by Act 498. AJRS is administered by APERS staff and shares investment infrastructure but operates as a separate benefit plan with its own Board of Trustees and trust fund (~$309 million AUM, ~89% funded). FOIA Round 4 request filed and acknowledged same-day by APERS Staff Attorney Richmond Giles — the single attorney handling FOIA correspondence for both pension systems, operationally confirming the shared-staff structure. Production deadline extended to May 15, 2026.

Neither pension board produced an independent credit analysis before authorizing these purchases. ATRS established its written investment guidelines four months after the board vote. APERS authorized up to $50 million before staff had even established a contact at the bond issuer. The credit risk was not unknown inside state government — the State Treasurer’s own senior investment staff had already flagged credit-rating downgrades in a late-2024 memo recommending the Treasury hold its existing positions. What the pension boards lacked was their own analysis. What changed in spring 2025 was not the credit picture, but the political pressure.

The influence chain

How did it happen?

The diagram below traces the documented connections from our FOIA investigation. Two sources of influence — Dennis Milligan (the former Treasurer who became Auditor of State) and the bond issuer's sales representatives — flow through intermediaries to reach three state agencies and an interstate replication network. Hover over any connection to see the specific relationship documented in public records.

Every connection shown is documented in FOIA records obtained from Arkansas state agencies. Link thickness represents relative influence weight, not dollar amounts. For the full evidence chain, see our evidence page and key figures profiles.

The legal standard

The fiduciary problem

Arkansas law is clear about how pension investments must be made:

Sole interest rule: Trustees must invest assets “solely in the interest of the members and benefit recipients of the trust” (Ark. Code Ann. § 24-2-614).
Pecuniary factors only: The State Government Employee Retirement Protection Act (Act 498 of 2023) requires pension board investment evaluations to be based “only on pecuniary factors” (Ark. Code §§ 24-2-802(4)(A), 24-2-804(a)) — those with a material financial effect on risk or return.
Prudent investor standard: Trustees must manage assets with the care an experienced, prudent investor would use, with appropriate attention to risk, return, and diversification (Ark. Code §§ 24-2-610–619).

Several red flags suggest these standards may not have been followed:

The ATRS Board Chair dissented. Danny Knight, the lone “no” vote on the June 2025 authorization, warned that selecting a specific bond at a trustee’s request was “going outside of the scope of the way we usually do things.” ATRS typically relies on professional investment managers — not board members — to recommend specific securities.

No independent credit analysis was produced. Our review of more than 1,200 public records obtained through FOIA requests to Arkansas state agencies found zero independent credit analyses of these bonds prepared before the authorizations. The normal process — where investment consultants provide written recommendations — appears to have been bypassed. The same APERS meetings that produced 37 pages of Callan analysis for other investments contained zero pages of analysis for the sovereign bond authorization. (The Treasury’s own investment policy establishes the standards that should have governed this decision.)

Two pension funds, no independent analysis either way. APERS chose to purchase the bonds directly without an external investment manager, with its CIO stating there was “not a need to incur management fees.” ATRS, by contrast, hired Reams Asset Management — but established its investment guidelines four months after the board authorized the purchase. Neither approach included independent credit analysis before authorization.

The investment was championed through political channels. State Auditor Dennis Milligan, an ex officio trustee with voting rights on both the ATRS and APERS boards (Ark. Code § 24-7-301), arranged meetings between the bond issuer’s sales representatives and state officials. From the public record: In a reply to the Auditor’s office, a senior executive from the issuer’s broker-dealer called Milligan “truly one of a kind” and said he was “forever grateful” for his support — language that describes a political relationship, not a standard financial transaction.

The Auditor’s office played at least five documented operational roles. Jason Brady — the Auditor of State’s appointee to the APERS board — introduced the bonds to the board, citing Treasury’s $55 million in holdings. But Auditor Round 2 records reveal Brady’s involvement went far beyond that single board meeting. He served as meeting broker (staffing all four April 2025 pitch meetings), information relay (forwarding ATRS board communications to Milligan’s personal email and routing press inquiries from APERS to the Auditor’s office), media response coordinator (receiving Fecher’s forwarded “Request for comment” from the Arkansas Times), State Financial Officers Foundation (SFOF) speechwriter (drafting Milligan’s Spring 2025 speech to the national conference), and physical designee (signing the ATRS board meeting attendance sheet on June 2, 2025 as Milligan’s representative). From the public record: A handwritten note from Brady’s files — an undated legal pad page listing “Israel Bonds Trust / 10 ATRS / 130 APERS / ? John Thurston 250 / 505” — shows a single person in the Auditor’s office tracking allocations across all three investing entities on one page. The figures do not match the final authorized amounts, suggesting this was an early working document from before the formal board votes.

Public statements emphasized political symbolism, not financial merit. From the public record: Governor Sanders publicly stated that “Arkansas puts its money where its mouth is and is investing millions in Israeli bonds.” Former Treasurer Larry Walther called this investment “a testament to our longstanding belief in Israel’s resiliency […]” At the APERS Investment Subcommittee meeting, Deputy Auditor Jason Brady referenced the U.S. Ambassador to Israel (former Arkansas Governor Mike Huckabee) as “my and Amy’s former boss” and called Israel “the United States’ most trusted and dependable ally in a volatile region.” None of these are pecuniary factors.

The pattern is clear: the idea for these investments originated through political channels, was promoted by a state official with explicit non-financial motivations, bypassed the normal professional recommendation process, overrode internal staff advice against new purchases, and was publicly celebrated as a political statement. Whether the bonds happen to be “investment-grade” does not answer the question of whether the process met Arkansas’s fiduciary standards.

The principle

The fiduciary baseline

Non-marketable foreign sovereign debt is a class of investment that bypasses the price discovery and credit signaling that liquid markets perform automatically. Without a secondary market, there is no continuous repricing of the obligor’s credit. Without a continuous price, there is no market check on the underwriter’s analysis.

For that class of instrument, prudent management requires what the market would otherwise provide: documented, independent credit analysis before the commitment is made.

For non-tradable sovereign debt, independent credit analysis is not optional rigor. It is the substitute for the market scrutiny that a secondary market would otherwise impose.

Arkansas’s pecuniary-factors standard (Act 498 of 2023, the State Government Employee Retirement Protection Act, Ark. Code §§ 24-2-802(4)(A), 24-2-804(a)) requires pension board investment evaluations to be based “only on pecuniary factors” — those with material financial effect on risk or return. The prudent-investor rule (Ark. Code §§ 24-2-610–619) requires comparable diligence from pension trustees. Together, those standards already require the kind of analysis our FOIA investigation found missing.

Our campaign is not asking for anything new. We are asking:

Were these investments made through the standard process of independent financial analysis?
Were they evaluated solely on pecuniary factors — risk, return, and liquidity?
Were the internal staff recommendations against new purchases given proper weight?
Can the state produce the documented, independent credit analysis that prudent investment requires?

These are not political questions. They are fiduciary questions. And Arkansas pension beneficiaries — teachers, public employees, and retirees — deserve answers.

Read the source documents yourself — we’ve published key FOIA documents for public review.

The ask

What we’re asking for

Our requests are straightforward:

Pause — Halt new purchases of these bonds until an independent credit analysis is completed and shared with pension fund members.
Transparency — Publish the financial analysis comparing these bonds’ risk, return, and liquidity against comparable fixed-income alternatives.
Process review — Document how the recent authorizations complied with Arkansas’s pecuniary-only standard and the normal manager-driven investment process.
Member input — Invite public comment from the educators, public employees, and retirees whose retirement savings are at stake.
Pension Investment Transparency Act — Issuer-neutral legislation requiring independent analysis, consultant independence, liquidity disclosure, documented rationale, and consistent application of the pecuniary-factors standard before pension boards commit to non-tradable sovereign debt.