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Detroit's Pension Funds Dogged by Bad Deals

Real estate investments led to a half-billion dollars in losses
Members of the Detroit Fire Department (DFD) hold signs while protesting in front of the Theodore Levin U.S. Courthouse in Detroit on July 24
Members of the Detroit Fire Department (DFD) hold signs while protesting in front of the Theodore Levin U.S. Courthouse in Detroit on July 24Photograph by Jeff Kowalsky/Bloomberg

In 2006 businessman Robert Shumake asked the boards of Detroit’s two pension funds—the General Retirement System and the Police and Fire Retirement System—to give him $27 million to invest in real estate. George Orzech, a fire battalion chief who represented uniformed workers as a trustee on their fund’s board, found one thing odd about Shumake’s pitch. “Anybody who knows the first names of trustees in a first meeting has already had meetings with people,” says Orzech, who unsuccessfully opposed the plan. “It was a political deal.”

The deal didn’t work out so well. The general employee pension invested $12 million with Shumake’s fund, Inheritance Capital Group, and the police and fire fund invested $15 million, according to a suit they filed against the company in Wayne County Court in 2011. The stakes were valued at $1.7 million and $11.6 million, respectively, as of June 30, 2011. Inheritance Capital Group filed for bankruptcy in April 2012, and Shumake, who hasn’t been sued and didn’t respond to calls seeking comment, filed for personal bankruptcy in January. Shumake told the boards he was a real estate broker and attended the “Larry Pino Institute of Finance,” the complaint said. But his real estate license had expired, and, according to the suit, the institute doesn’t exist.