>> two million for arrowhawk. he brought in some other investments to the total of x million. >> smith: but at the time of the vote, the board didn't know there was a acement agent operating in the background. >> it was never disclosed in financial statents, it was never disclosed anywhere that... even the existence of placement agents. >> i think that one of the key issues is disclosure of placement agent fees. >> smith: tobe then hired ted siedle, a financial crimes investigator. they eventually filed a 32-page complaint to the s.e.c. >> so i thought it was a good case. >> smith: the s.e.c. and state audito investigated and found no laws were broken. but the auditors did concludeth tosh violated krs's disclosure rules. tosh left kentucky and has not returned our calls. sergeon has since died. what's the headline here? >> well, the headline was that there were these abuses involving placement agents, $14 million had been paid to undisclosed individuals for doing little or nothing. it was happening all over the co

krs eventually recouped itsmo y from arrowhawk.nother hedge fund investment involved the camelot group. camelot had a manager who, in a separate case, was charged and pled guilty to personally pocketing over $9 million of investors' money. despite this, krs would continue to invest in more hedge funds. >> it was a great big "put all of the chips on the red seven." that's what we're gonna do with pension money for firefighters and cops and janitors. >> smith: ann oldfather is a louisville attorney who represented firefighters in a pension-relad lawsuit. >>hey decided, "we're not going to go public, we're not going to say we need help.e weing to try to save our rears and this'll work." isn't that what the gambler always dreams? had so they start the beauty contest, and the perhaps 15 hedge fund managers that they interview and meet with, and talk to, and whittle it down to the final three winners. (car horns honking) >> smith: the winners were pacific ternative asset nagement company, or paamco, prisma capital partners, and blackston