State Pension Oversight: Fox Guarding Hen House?

Today Forbes has an update written by the investigator hired by the State Employees Association of NC (SEANC) to evaluate NC’s state pension system for potential pay to play conflicts.

Some interesting snippets:

Last week I was surprised to learn that both the North Carolina Department of State Treasurer and the State of Connecticut Office of State Treasurer, which oversee massive state pensions of $83 billion and $26 billion respectively– states in which a publicly elected Treasurer serves as the sole trustee of workers’ retirement funds–have a leading plaintiff class action law firm, Cohen Milstein, serving as their outsourced Compliance Counsel.

…

As a former in-house Director of Compliance of one of the largest asset managers, I can envision many thorny ethical dilemmas and potential conflicts of interest that may arise.

For example, I would want to know whether any firm selected as Compliance Counsel to a public pension, or persons affiliated with them, have made contributions to the campaigns of any politicians involved in overseeing these funds. According to Brian Balfour, Policy Director for the Raleigh-based government watchdog group the Civitas Institute, State Board of Elections records indicate Cohen Milstein employees donated $5,000 to sole pension trustee North Carolina Treasurer Janet Cowell’s campaign fund in 2012. Evidently Cowell learned nothing from donation scandals that plagued her predecessor.

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Pay-to-play concerns related to political donations by class action lawyers pitching their services to public pensions is commonplace, attracting more attention in recent years but is still largely overlooked by state bar associations, state and federal regulators and law enforcement. If the Compliance Counsel reviewing political giving by pension money managers has itself been donating to the sole pension decision-maker, that, in my opinion, is not a terribly promising start. (emphasis added)

Such actions raise still more concerns about conflicts of interest coming from Cowell’s office. The results from this investigation could prove interesting reading.