DALLAS — Arizona's Public Safety Personnel Retirement System is suspected of reporting false values for its real-estate investments, according to the Arizona Police Association, which is seeking a criminal investigation of the matter.

"There is a cloud of smoke ascending from PSPRS," wrote Levi Bolton, the association's executive director, in a letter to the Arizona Attorney General's office. "Only a criminal investigation will reveal what the source of the smoke is."

Bolton said the investigation should focus on the pension fund's real-estate portfolio managed by Scottsdale-based Desert Troon Cos.

"We recognize that bad investing is itself not a criminal act," the letter said. "Attempting to cover up these investment losses, however, through deceptive, false and fictitious statements is."

The letter was forwarded to Maricopa County Attorney Bill Montgomery, because the Attorney General's office said that pursuing the matter would represent a conflict of interest.

The pension system said it would cooperate in any investigation that might follow.

Three portfolio managers at the pension fund have resigned recently, the Police Association letter says.

"Each has cited the valuation methods employed by DTC and expressly permitted by the PSPRS management, as the primary reason," Bolton wrote, adding that it was time "to pull back the curtain and show us, the beneficiaries of the trust, what is really going on."

Desert Troon manages a portfolio of retail, residential and commercial real-estate properties for the trust and was paid at least $12 million in fees in 2012, according to the Arizona Republic, which published stories on the issue in August.

The trust this year again is considering reporting higher property values quoted by Desert Troon, rather than lower valuations recommended by Ernst & Young, trust administrator Jim Hacking told The Republic. The difference in those values is $82 million.

Assets under Desert Troon's control have suffered significant losses for the trust since fiscal 2009, records compiled by The Republic show.

The trust's collective losses from properties managed by Desert Troon from fiscal 2009 to 2012 were at least $284 million, according to reports compiled by The Republic.

A spokeswoman for Desert Troon said the company had no comment on the matter.

In a response to a Republic editorial about the issue, the PSPRS wrote that the system's losses in 2008 and 2009 were "the result of the unprecedented financial market declines that culminated in the Great Recession (over which PSPRS management had no control), while that of 2012 was also the result of financial market downturn and volatility."

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