Skip to content
Link copied to clipboard

PhillyDeals: N.J., Phila. act to curb fund managers' political contributions

A 2010 federal law bars private money managers who invest state and local pension funds from making political contributions to state and local officials who hire private money managers.

A 2010 federal law bars private money managers who invest state and local pension funds from making political contributions to state and local officials who hire private money managers.

But wealthy hedge, buyout, and real estate investment magnates still can and do finance Congress members and national political committees closely tied to state and local politicians while also collecting fat fees from state and local pension funds.

Last week, New Jersey and Philadelphia both acted on legislation that attempts to curb these conflicts of interest. Or at least measure them.

On Wednesday, a majority of the trustees of Philadelphia's $4.8 billion city pension plan agreed to ask dozens of private firms that are paid to manage city money - from giants such as KKR and Barclays to local firms like Ted Aronson's AJO Partners - to "disclose their political spending," starting Jan. 1.

The move was cheered by City Controller Alan Butkovitz, who told me when he was drafting the proposal that my reporting influenced his position. "We will be asking for all donations from everybody," including federal and state as well as city contributions, Butkovitz said. The four city union representatives on the board agreed, and the bill passed.

Mayor Nutter opposes such disclosure because he fears it could backfire and look like a shakedown, his spokesman, Mark McDonald, said: "By requiring these managers to disclose campaign contributions to the Pension Board, contributions which are already memorialized in reports filed with various local, state, and federal authorities, this information-gathering by the Pension Board could be viewed by some as an unstated condition for future work."

Well, that argument assumes political spending is publicly disclosed; in fact, much of it is hard to trace. At least you can ask.

The board acted after the Securities and Exchange Commission's first-ever order that a private money manager, Wayne-based TL Ventures, return $300,000 in state and city pension fees, when it found TL founder Robert Keith had given cash to Gov. Corbett and Mayor Nutter while getting paid to manage state and city pension funds. (Since the 1990s, TL has cost the city more in fees than it has paid in profits.)

On Thursday, the New Jersey Senate passed by a 25-8 vote bill S-2430, which would ban campaign donations to national political committees by state investment contractors and would also order that the state regularly report fees and profits (or losses) for its professional managers. (It took half the summer for the state to produce pension manager fee records when I asked for them, and the Treasury Department has since told me some payments are not included.)

Announcing the bill last week, State Sen. Shirley Turner (D., Ewing), a co-author of the measure, cited my Sept. 2 column noting that New Jersey managers are barred from giving to state political groups, but remain free to finance federal political committees such as Gov.Christie's Republican Governors Association.

Turner also cited reporter David Sirota's International Business Times reports detailing the hiring of RGA donors to manage New Jersey pension funds. Christie says the state hires managers based on their merit.

Pro investors are such big-time campaign financiers that banning donations would "basically shut down" New Jersey's multibillion-dollar investments in hedge funds, buyout funds, real estate, and other "alternative investments," the state Investment Council director, Christopher McDonough, said at a council meeting last month, according to The Inquirer's Andrew Seidman.

"That would be a good thing, in my opinion," Turner said. "We need a firewall between the investment of the pension funds and politics."