Craig Harris

The Republic | azcentral.com

PSPRS gave Deputy Administrator Jared Smout a $7,178 annual raise.

Smout's annual salary increased to $166,650.

The large raise was authorized despite warnings from Gov. Jan Brewer.

On the same day that public-safety pension trust chairman Brian Tobin apologized and promised to rescind five controversial raises, now-departing administrator Jim Hacking gave a $7,178 raise to his deputy, records obtained by The Arizona Republic show.

Tobin on Wednesday said he was unaware of the latest raise. While Tobin said it did not require board approval — Hacking had the authority to grant it — he also said he was "trying to understand the timing."

The raise to Public Safety Personnel Retirement System Deputy Administrator Jared Smout was given the day after Gov. Jan Brewer expressed outrage over the illegal raises at the trust. Brewer, who appointed all seven PSPRS board members, had called for "further transparency and accountability" at the pension system for Arizona police officers, firefighters, elected officials and prison guards.

Despite Brewer's concerns, Hacking signed an amended employment contract giving Smout a 4.5 percent raise, according to a copy of the document obtained under the Arizona Public Records Law.

That amendment lifted Smout's annual pay to $166,650. A PSPRS spokesman said the timing was coincidental.

Brewer said through her spokesman that she was dismayed.

"Gov. Brewer has expressed vehement concern over the raises being improperly handed out by (and to) officials at PSPRS," Andrew Wilder, Brewer's spokesman, wrote in an e-mail. "Each new revelation simply underscores that something is wrong at PSPRS — and affirms the governor's belief that there must be a complete, upfront accounting of the situation at PSPRS and its officials need to act with full transparency."

While Brewer appoints the PSPRS board, she does not have authority to hire or fire staff.

The FBI is conducting a criminal investigation of the $7.9 billion pension system based on allegations by ex-employees that it overvalued real-estate investments to improve the bottom line and trigger staff bonuses. Hacking has denied the allegations.

Meanwhile, the state Department of Administration is conducting a workplace investigation of PSPRS that includes allegations of sexual harassment within the agency.

The trust's board on Friday started the process to terminate Hacking after TheRepublic disclosed the investment-staff raises, which were given without Arizona Department of Administration approval as required by law.

Hacking and Tobin have acknowledged they were given without ADOA approval.

Previously acquired public records show Smout in December authorized a PSPRS accountant to process raises for four investment staffers that were retroactive to July 1, 2013. In total, five investment staffers received annual raises ranging from 7.5 to 26.7 percent.

Neither Smout nor Hacking returned calls Wednesday seeking comment. Wednesday was Hacking's last day in office before starting a board-imposed administrative leave.

Hacking and the board are negotiating a settlement to buy out his $234,00 annual contract. Hacking also is expected to receive a lifetime annual state pension, though PSPRS has refused to release documents that would allow the newspaper to calculate his pension.

Brewer pushed through personnel reforms in 2012 that gave ADOA power to approve salary increases for state employees. The law also required state agencies to consult with ADOA on employment contracts, though ADOA does not have authority to outright reject a contract.

Brian McNeil, ADOA's director, said he was unaware that Hacking had authorized last week'sraise for Smout until informed about the contract by The Republic.

As that raise was being approved, McNeil and Tobin were in negotiations over the illegal investment-staff pay raises and discussinghow PSPRS would take steps to correct the problem so it didn't happen again. The trust also is trying to clarify the terms of contracts that gave raises to two other PSPRS executives.

Amid the negotiations, Tobin wrote a letter to McNeil apologizing for "mistakes that have been made in implementing the salary rate adjustments."

McNeil said he had no additional comment on Smout's raise.

Steve Meissner, a PSPRS spokesman, said the increase was approved as part of the agency's budget process in May and June and did not require ADOA approval. He said the contract was amended July 9 because staff payroll was being processed, and it was a reminder that the pay increase for Smout needed to be approved.

"Having it happen the same day as Mr. Tobin's letter was purely coincidental," Meissner said.

Meissner said Hacking had legal authority to amend Smout's 10-year-contract. That's because it was first signed in April 2012, a month prior to Brewer signing personnel-reform legislation.

"Mr. Hacking felt Mr. Smout's performance over the past year warranted that increase," Meissner said.

Levi Bolton, executive director of the 14,000-member Arizona Police Association, said the timing makes him scratch his head.

"I would think that a huge exercise of caution and restraint would go on right now," Bolton said. "Given the climate, you have to ask yourself, 'What is the thought process, to do things as business as usual?' There should be a moratorium on any economic business (for staff) until their house is in order."