In 2011, Massachusetts Gov. Charlie Baker donated $10,000 to the New Jersey Republican State Committee.
Less than a year later, New Jersey committed $25 million in pension money to General Catalyst Partners for management – the firm where Baker was an executive.
The transaction raised the red flags of a pay-to-play violation.
But an audit released yesterday cleared Baker of any wrongdoing.
From the Associated Press:
A New Jersey treasury audit has found Massachusetts Gov. Charlie Baker did not break pay-to-play rules when he donated to Republicans here in 2011.
New Jerseys regulations bar the state from investing with a firm whose managers made political contributions within a two-year window. The audit says while Baker was an investment professional, he did not provide the kinds of services the policy prohibits.
The audit also suggests Baker and General Catalyst forcefully resisted the possibility of any wrongdoing. For example the firm wrote to the auditor in May 2014 that “Mr. Baker has never been an executive officer, owner or other control person of GC and has never solicited investors when GC raised funds.”
Baker himself hired the law firm Covington & Burling, which expressed a similar view, the audit said.
While the report recommends the state should consider strengthening its due-diligence procedures, the audit said the State Investment Council, the body that sets investment policy, reported it met those standards.
The audit was released and presented at the Thursday meeting of the State Investment Council.
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The results of several state-level elections could have implications for pension fund investments as three ex-financial firm executives became their states’ respective governors.
David Sirota writes:
Wall Street firms and executives have poured campaign contributions into states that have embraced the strategy, eager for expanded opportunities. Tuesday’s results affirmed that this money was well spent: More public pension money will now likely be entrusted to the financial services industry.
In Illinois, Democratic incumbent Pat Quinn was defeated by Republican challenger Bruce Rauner, who made his fortune as one of the namesakes of Golder, Thoma, Cressey & Rauner (GTCR) – a financial firm that manages more than $40 million of the state’s $50 billion pension system. Rauner — who retains an ownership stake in at least 15 separate GTCR entities, according to his financial disclosure forms— will now be fully in charge of the pension system.
In Rhode Island, venture capitalist Gina Raimondo, a Democrat, defeated Republican Allan Fung. Raimondo retains an ownership stake in a firm that manages funds from Rhode Island’s $7 billion pension system. Raimondo’s campaign received hundreds of thousands of dollars from financial industry donors. She was also aided by six-figure PAC donations from former Enron trader John Arnold, who has waged a national campaign to slash workers’ pensions. Fung slammed Raimondo as a tool of Wall Street, but she eked out a victory after a libertarian-leaning third party candidate, Robert Healy, unexpectedly siphoned votes away from Fung.
In New York, Gov. Andrew Cuomo, a Democrat, handily defeated his Republican opponent, Rob Astorino, after raising millions of dollars from the finance industry. The New York legislature is set to send Cuomo a bill that would permit the New York state and city pension funds to move an additional $7 billion into hedge funds, private equity, venture capital, real estate and other high-fee “alternative” investments. Assuming the standard 1 to 2 percent management fees applies, that could generate between $70 million and $150 million a year in fresh fees for Wall Street firms.
Cuomo has not taken a public position on the bill, but his party in the legislature passed it by a wide margin, and he is widely expected to sign it into law.
In Massachusetts, Republican Charlie Baker appeared early Wednesday to have secured a narrow victory over Massachusetts Attorney General Martha Coakley. Baker was a board member of mutual funds managed by a financial firm that also manages funds from Massachusetts’ $53 billion pension system. Baker is also the subject of a New Jersey investigation over his $10,000 contribution to the New Jersey State Republican Party just months before New Jersey Gov. Chris Christie’s officials awarded his firm a state pension deal. Christie, whose Republican Governors Association spent heavily to support Baker’s campaign, blocked the release of documents related to that investigation until after the election.
Read the full analysis here.
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