Yesterday’s International Business Times calls into question some of State Treasurer Janet Cowell’s decisions and transparency over the past few years in her role overseeing the state’s pension fund. Specifically, it examines the new “Innovation fund” Cowell created in 2010 and how it has benefitted political allies – specifically Erskine Bowles.
From its inception, the innovation fund was run jointly by Cowell and the multinational banking giant Credit Suisse. Within a year of its launching, a fundraiser for Cowell was held at Bowles’ home. Weeks later, the innovation fund awarded a contract to Bowles’ firm, Carousel Capital, to manage some of the fund’s money. Only three days after that, Carousel filed documents with the SEC showing that the firm had paid Credit Suisse $775,000 for the bank’s work as a so-called placement agent in helping Carousel attract investment money.
In other words, in its role ostensibly protecting North Carolina taxpayers’ interests, Credit Suisse steered state pension money to a politically connected firm that was paying the bank to help it land pension deals.
Financial and pension management experts inside North Carolina and beyond now say the deal can be viewed as a particularly pungent example of the dubious role of placement agents — intermediaries hired by private financial firms to help them secure fee-generating deals to manage public pension money.
According to the article, Cowell used her power over the state pension fund to reward Erskine Bowles – who just so happened to be a fundraiser for Cowell.
Sound familiar? It should.
Remember a couple of years ago when Cowell invested millions of the pension fund in the Facebook IPO? Bowles was on the board at Facebook and also at Morgan Stanley who was the primary underwriter of the deal and as such reaped millions in fees, so he was involved in two firms that stood to benefit from Cowell’s actions.
And then there is the lawsuit against Facebook for its IPO in which the NC pension fund served as a lead plaintiff, and Cowell just so happened to select out of state law firms who were major donors to her campaigns to represent the pension fund, and in turn earn perhaps millions in fees.
How many more cases of Cowell leveraging her power over the state pension fund to enrich her political cronies are there?
All of this corruption further makes that case that the power over the state employee pensions should be taken out of the hands of politicians and government bureaucrats and instead given to the employees themselves. This could be done by transitioning the pension fund to a 401(k) style defined contribution plan.