Union Files SEC Complaint Alleging Pension Pay-To-Play In North Carolina

Janet Cowell

A North Carolina labor group has filed a whistleblower complaint with the SEC over what they believe to be a violation of the SEC’s pay-to-play rules.

The group alleges that Erskine Bowles held a fundraiser for state Treasurer Janet Cowell at his home in 2011. Just weeks later, Bowles’ investment firm was chosen to handle investments for North Carolina’s pension funds, of which Janet Cowell is the sole trustee. From Bloomberg:

Former White House official Erskine Bowles was accused by a North Carolina workers’ association of violating political fundraising rules for money managers.

Carousel Capital, the firm Bowles co-founded in 1996 and where he is listed as a senior adviser, was selected to manage state pension funds a few weeks after a June 2011 fundraiser for North Carolina Treasurer Janet Cowell was held at his home, the State Employees Association of North Carolina said today in a whistleblower complaint to the U.S. Securities and Exchange Commission.

The fundraiser violated the SEC’s pay-to-play rule that bars investment advisers from managing state funds for two years following a campaign contribution to political candidates or officials in a position to influence the selection of advisers to manage public pension funds, according to SEANC’s complaint.

SEANC, which has about 55,000 members, also questioned whether Bowles’ wife, Crandall Bowles, was in violation of pay-to-play rules because she is on the board of JPMorgan Chase & Co., which manages several hundred millions of dollars for the $87 billion North Carolina state pension fund, which Cowell oversees.

David Sirota talked to Cowell and Bowles about the allegations:

In a statement emailed to IBTimes, Cowell’s spokesperson Schorr Johnson said:

“More than two years ago, the Department of State Treasurer verified with outside legal counsel that neither Erskine nor Crandall Bowles were covered by SEC prohibition. The Department then took it a step further by ensuring contractually with Carousel that they were compliant with this SEC rule. If Carousel failed to comply with the rule, the investment would likely end.”

In a previous statement to IBTimes, Erskine Bowles said, “I have had no active role [in Carousel] since 2005 (and) I am not involved in the management of the firm nor do I [have an] office there.” He also said the fundraiser was held at his home by his wife, Crandall, but that he was not affiliated with the event.