Cronyism, Losses Revealed in State Treasurer’s Record

NC State Treasurer’s Race: Janet Cowell, the Democratic candidate, invested $26 million from the state employees’ pension fund into the facebook ipo, immediately losing over 4 million, with many millions more projected as an eventual loss from the investment. Note that the only reason this information on the investment is publicly known is that it was detailed in court documents. You see, Cowell later signed North Carolina up to participate in a class action lawsuit against facebook for the loss.

Janet Cowell appears to have later engaged in “pay-to-play” cronyism by suggesting a law firm out of NY (Bernstein Litowitz Berger & Grossman) represent NC in the class action lawsuit, rejecting the use of five other “firms specializing in securities litigation to bring class-action suits against firms that engage in securities fraud,” (http://www.ncinsider.com/2011/10/05/116970/pension-litigation.html). Why would our state treasurer take special effort to ensure that NC hires a law firm out of New York to represent North Carolina in a lawsuit? A review of Cowell’s campaign reports indicate that her campaign has received over $72,000 in campaign funds from employees of the NY law firm since 2008!

This from a piece on the Civitas Institute website: “An examination of political contributions to Janet Cowell’s campaign since 2008 courtesy of the NC State Board of Elections shows that employees of Bernstein have donated nearly $75,000 to Cowell in the last two elections cycles (you can see a spreadsheet of the donations here).” http://www.civitasreview.com/budget-taxes/cowell-facebook-fiasco-more-questions-that-demand-answers/

One should also note that when asked to comment on the loss of millions from the state employees’ pension fund, a spokeswoman for Cowell gave a very dismissive response, which insinuates that several millions lost from the pension fund is just peanuts (less than .1 percent of the stock portfolio), and that they do this sort of thing all the time, almost as though it is ridiculous to express concern over the matter. From an Associated Press article: “This was an ordinary investment by the outside investment manager, made within the manager’s ordinary discretion under its contract with the department,” Julia Vail wrote in a statement. “The Facebook IPO investment was less than a tenth of 1 percent of the pension fund’s global (stock) portfolio.”

Fergus Hodgson, director of fiscal policy studies with the John Locke Foundation, counters that “state employees expect their pensions with 100 percent certainty—and there is legal precedent to support that—so the security of investments should reflect that expectation. The initial Facebook stock offering could hardly be considered secure, so Cowell appears to be attempting, but failing, to keep up with unrealistic projected returns. With each failure, the unfunded liabilities within the state’s pension plans continue to worsen.”

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3 thoughts on “Cronyism, Losses Revealed in State Treasurer’s Record

  1. Pingback: More stumbling and cronyism from North Carolina’s treasurer | The Locker Room

  2. Pingback: “Fire Janet Cowell” – Treasurer’s Record Too Sensitive for Facebook?? | Carolina Liberty PAC

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