After blowing a lot of cash by investing in Lehman last year, the state of New Jersey is suing former executives of bankrupt Lehman Brothers. It wants its $118 million back, dammit.
The move was an unusual one at the time, as New Jersey essentially followed the sovereign wealth fund strategy of investing in distressed financials. Little did any of them know how distressed they were.
The state claims it was duped by misrepresentation and fraud. They make all the predictable claims, about Lehman intentionally hiding the true state of its balance sheet, its liquidity and its exposure to real estate. Maybe that’s true.
But wait, maybe it’s that Jon Corzine is behind in the re-election polls and he wants to pick a fight with a villian perceived as having cost the taxpayers money. Also a possibility?
Last Summer, Portfolio profiled the state’s pension chief. See if this sounds familiar to you:
Clark is the director of the division of investment for the state of New Jersey, which has one of the biggest state pension funds in the country. A former insurance executive, Clark oversees the $77 billion investment portfolio for the state’s workers.
In recent years, the group has shifted its investment strategy away from a standard mix of stocks and bonds to include exposure to commodities, hedge funds, private equity funds, and real estate. The goal is to allocate 19 per cent to so-called alternative investments, which is considered aggressive for a state pension fund. To date, the fund has committed 12 per cent to that category, and it still has 7 per cent to go.
This means that Clark’s phone is ringing. So far, New Jersey has invested in funds from Apollo, Blackstone, TPG Partners, Wilbur Ross, Carlyle, Och-Ziff, and dozens of others, big and small.
No doubt NJ taxpayers have lost a lot of cash this year. Judging from this, we don’t think it’s really Dick Fuld’s fault.
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