SEANC: Treasurer's handling of pension fund warrants criminal probe

Posted April 22, 2014

— A state employees' organization called Tuesday for a criminal investigation into State Treasurer Janet Cowell's handling of the state's $87 billion pension fund.

The State Employees Association of North Carolina, a longtime critic of the Treasurer's Office and the fees the pension fund pays to financial managers, hired an investigator to review the fund's finances.

The Florida-based investigator, Ted Siedle, accused Cowell of a "heist" because $30 billion of the pension fund has been moved into alternative investments that aren't open to public inspection. The names of the money managers and the fees charged are secret, he said, which goes against legislation the General Assembly passed last year to fully report all fees.

"There's compelling evidence of wrongdoing," he said.

SEANC requested investigations by the Securities & Exchange Commission, the Internal Revenue Service and the FBI, as well as the State Auditor's Office and the North Carolina Attorney General's Office.

"The magnitude of the scam is 20 times greater than Madoff," Siedle said during a news conference, referring to jailed Wall Street financier Bernie Madoff, who is believed to have fleeced $18 billion from investors.

Schorr Johnson, a spokesman for the Treasurer's Office, said Siedle's report "is simply wrong" on several points.

"A full accounting of every dollar of the pension fund is provided in the annual report," Johnson said in an email.

Siedle said Cowell's control over the pension fund makes her the most powerful politician in the state because she can "facilitate political contributions not only to herself but to others as well," and he accused her of making questionable investment deals that have enriched local firms.

In addition to criminal investigations, SEANC called on lawmakers to change the way the state pension fund is governed. The group wants it to be overseen by a board, instead of only by the treasurer, and it wants prohibitions against any investment deal that would keep details secret.

North Carolina is one of only four states with a sole fiduciary running its public pension fund, Siedle said, and the only state he knows of with a pension fund that has never been audited.


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  • Greg Boop Apr 23, 2014
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    However over 90% of managed funds do not beat their associated index after fees.

  • Kenny Dunn Apr 23, 2014
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    I properly managed portfolio CAN beat going to index funds. Not in a single year or cycle but over time.

  • glarg Apr 23, 2014

    "The 2012 Annual Report on the State Pension Fund shows the allocations dedicated to Hedge Funds -

    Personally I don't believe there is anything illegal going on, but it would be better to align ourselves with 46 other states and have broader oversight of the state's pension investments."

    OK so from p.63 you have 4.2% of the managed fund in what might broadly be termed hedging. Where is the "scam" and the "heist" that SEANC is claiming??? Its just irresponsible nonsense.

    I will say that the "Ensuring Transparency, Ethics and Accountability" section p 12 is paper thin and includes things like upgrading internet bandwidth and conducting listening tours. Having a private auditing firm would be an improvement, as would normalizing their Annual Report into a more accepted format instead of just putting things under the heading of "Statistics".

  • carlomontenegro1 Apr 23, 2014

    SEANC is as corrupt an organization as one will ever find. They scam millions of dollars from member's paychecks every month. Now they want to direct the prosecution of the State Treasurer after having bought a candidate for Wake District Attorney. Shameful.

  • Janni Cone Apr 23, 2014
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    WesternWake1 is spot on. Honestly - if anyone could constantly average better returns than the overall market - they'd be "king". Too many of these funds only serve to line the pockets of the find managers. I always ask about fund performance vs an easy index performance - a la S&P 500, DJI Index, etc..... Rarely is anyone consistently above it - and Index funds are a cheap no brainer.

  • dollibug Apr 23, 2014

    Secrets can cause lots of *CORRUPTION AND COVER UP* and any and all accounts which manage money should at the very least have *dual control*....NEVER should only one person be allowed to manage any sort of account. Audits should be REQUIRED AND DONE each and every year at least. IF there are questions then it should be checked more. People are *tempted* by evil. Sad but so very true. There are lots of wicked and evil people who will go to extremes to take money that does NOT belong to them, thinking they will get by with doing it and for the most part, I am sure they do. This is what is WRONG with our government. People are not held responsible or accountable for their actions. There should be LAWS in place which make sure this is required and followed. This might help STOP some of the CORRUPTION AND COVER UP.

  • Greg Boop Apr 23, 2014
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    Taking a look at past statements from the State Treasurer's office and previous press - in this case Alternative Investments mean "Hedge Funds". The move of state investments to Hedge Funds was deliberate with the intent of increasing returns in a low interest rate environment. - however note that Alternative investments still only account for a small percentage of the state's overall pension investments.

    The 2012 Annual Report on the State Pension Fund shows the allocations dedicated to Hedge Funds - I don't believe there is anything illegal going on, but it would be better to align ourselves with 46 other states and have broader oversight of the state's pension investments.

  • glarg Apr 23, 2014

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    There is a big difference between hedging positions (conservative approach) and investing in hedge funds (which could be aggressive).

    Where is the evidence that the fund are invested heavily in aggressive hedge funds?

    From the numbers that the Treasures Office has released they are paying $416M to manage a portfolio of $86B, so nothing like 2% is being paid.

    I am seeing a lot of irresponsible and wild statements from SEANC and it is had to take those people seriously in anything. Even if you stipulate to high fee thats a world of difference from the out and out Madoff scam.

  • Paul Stroud Apr 23, 2014
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    @justaname, thats ridiculous, SEANC cannot have complete control. That's the job of the comptroller. They just want some kind of oversight and auditing capability. Please explain to me why that is a bad thing.

  • Greg Boop Apr 23, 2014
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    I say it would be fair to say that SEANC wants proper oversight of the fund, not oversight by one individual.

    Proper oversight of the pension fund is something that 46 other states have, and we need to follow their example in North Carolina.