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“It Ain’t Over Yet, There’s A Whole New Inquiry”: Christie’s Administration Is Facing Another Investigation

If after last week’s Bridgegate indictments you thought Chris Christie was finally done as the focus of government investigations, think again. The Republican governor’s administration in New Jersey is facing a whole new inquiry — this one involving hundreds of millions of dollars, and not just blocked-off bridge lanes.

At issue are the fees being paid by New Jersey’s beleaguered public pension system to Wall Street firms. In recent years, Christie’s officials have shifted more of the retirement savings of teachers, firefighters, police officers, and other public workers into the hands of private financial firms. That has substantially increased the management fees paid by taxpayers to those firms. Indeed, while Christie says the pension system cannot afford to maintain current retirement benefits, pension fees paid to financial firms have quadrupled to $600 million a year — or $1.5 billion in total since he took office in 2010.

In recent months, details have emerged showing that Christie officials have directed lucrative pension management deals to some financial companies whose executives have made contributions to Republican groups backing Christie’s election campaigns. Additionally, Christie’s officials have admitted that they have not been fully disclosing all the fees the state has been paying to private financial firms.

Not surprisingly, this has made the trustees who oversee the state’s retirement system more than a little bit nervous — especially since the ever-higher fees have coincided with below-median returns for the state’s pension fund. So the trustees began asking questions, and when they didn’t get the answers they were looking for, they announced in April that they are launching a formal investigation of the matter.

Wayne Hall, the chairman of one of the state’s pension funds, told the Newark Star-Ledger that the new investigation is designed to help retirees understand why the state is paying so much.

“I’m a layman. I’m not on Wall Street. I’m not an investor, and I have 33,000 people that I answer to and they’re not investors either,” he told the newspaper. “Why are we paying that kind of money? When I see the exorbitant fees the state has been paying for the last couple of years, I have to question that.”

In their quest for better disclosure, Hall and his colleagues received a boost from an unlikely source: conservative activists. When it comes to pensions, those activists are often calling for benefit cuts, but when it comes to transparency, they are standing on the same side as the retirees.

“Both government workers and taxpayers deserve to know why such an incredible sum is being expended every year with the current system in deep crisis,” said Erica Klemens of the New Jersey chapter of Americans for Prosperity. “These are dollars that could be funding the system and preventing the state’s pension hole from growing even deeper. The decision by the trustees to look into this matter is the right thing to do.”

You might assume that the conservative support was designed to set the stage for New Jersey’s Republican governor to cooperate with the investigation’s push for transparency. But no — quite the opposite.

Only days after prosecutors indicted his appointees in the Bridgegate affair, Christie vetoed a bipartisan anti-corruption bill designed to insulate the state’s pension system from undue political influence. One of that bill’s provisions would have forced the state to better disclose the fees being paid to politically connected Wall Street firms.

That leaves the trustees to try get to the bottom of what’s really happening at the state’s $80 billion pension fund. They may not have the governor’s bully pulpit, but thousands of retirees are relying on them to bring the truth out from the shadows.

 

By: David Sirota, Senior Writer at The International Business Times; The National Memo, May 8, 2015

May 10, 2015 Posted by | Chris Christie, New Jersey, Public Pension Funds | , , , , , , , | Leave a comment

“Paying Back Campaign Donors”: Whose Presidential Campaign Will Your Pension Finance?

Wall Street is one of the biggest sources of funding for presidential campaigns, and many of the Republican Party’s potential 2016 contenders are governors, from Chris Christie of New Jersey and Rick Perry of Texas to Bobby Jindal of Louisiana and Scott Walker of Wisconsin. And so, last week, the GOP filed a federal lawsuit aimed at overturning the pay-to-play law that bars those governors from raising campaign money from Wall Street executives who manage their states’ pension funds.

In the case, New York and Tennessee’s Republican parties are represented by two former Bush administration officials, one of whose firms just won the Supreme Court case invalidating campaign contribution limits on large donors. In their complaint, the parties argue that people managing state pension money have a First Amendment right to make large donations to state officials who award those lucrative money management contracts.

With the $3 trillion public pension system controlled by elected officials now generating billions of dollars worth of annual management fees for Wall Street, Securities and Exchange Commission (SEC) regulators originally passed the rule to make sure retirees’ money wasn’t being handed out based on politicians’ desire to pay back their campaign donors.

“Elected officials who allow political contributions to play a role in the management of these assets and who use these assets to reward contributors violate the public trust,” says the preamble of the rule, which restricts not only campaign donations directly to state officials, but also contributions to political parties.

In the complaint aiming to overturn that rule, the GOP plaintiffs argue that the SEC does not have the campaign finance expertise to properly enforce the rule. The complaint further argues that the rule itself creates an “impermissible choice” between “exercising a First Amendment right and retaining the ability to engage in professional activities.” The existing rule could limit governors’ ability to raise money from Wall Street in any presidential race.

In an interview with Bloomberg Businessweek, a spokesman for one of the Republican plaintiffs suggested that in order to compete for campaign resources, his party’s elected officials need to be able to raise money from the Wall Street managers who receive contracts from those officials.

“We see (the current SEC rule) as something that has been a great detriment to our ability to help out candidates,” said Jason Weingarten of the Republican Party of New York—the state whose pay-to-play pension scandal in 2010 originally prompted the SEC rule.

The suit comes only a few weeks after the SEC issued its first fines under the rule—against a firm whose executives made campaign donations to Pennsylvania Gov. Tom Corbett, a Republican, and Philadelphia Mayor Michael Nutter, a Democrat. The company in question was managing Pennsylvania and Philadelphia pension money. In a statement on that case, the SEC promised more enforcement of the pay-to-play rule in the future.

“We will use all available enforcement tools to ensure that public pension funds are protected from any potential corrupting influences,” said Andrew Ceresney, director of the SEC Enforcement Division. “As we have done with broker-dealers, we will hold investment advisers strictly liable for pay-to-play violations.”

The GOP lawsuit aims to stop that promise from becoming a reality. In predicating that suit on a First Amendment argument, those Republicans are forwarding a disturbing legal theory: Essentially, they are arguing that Wall Street has a constitutional right to influence politicians and the investment decisions those politicians make on behalf of pensioners.

If that theory is upheld by the courts, it will no doubt help Republican presidential candidates raise lots of financial-industry cash—but it could also mean that public pension contracts will now be for sale to the highest bidder.

 

By: David Sirota, Senior Editor, In These Times, August 15, 2014

August 22, 2014 Posted by | Campaign Financing, Public Pension Funds, Wall Street | , , , , , , , | Leave a comment

   

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