With the retirement pools deeply underfunded because of losses on risky investments, regulators all of the sudden want dig a little further into the grey area of political donations and investment decisions.
A USA Today investigation shows just how deep the ties go between financial firms, public pension investments and the politicians who help control them.
While legal, the report shows big contributions from the boldface firms of private equity and finance to influential officials, raising more questions about the independence and objectivity of public pension fund management.
USAToday: More than two dozen firms that have surfaced in a broad corruption investigation of public pension funds gave at least $1.97 million in campaign contributions to officials with potential influence over the funds’ investments, a USA TODAY analysis shows.
The givers included private-equity giants such as the Blackstone Group, the Carlyle Group and the Quadrangle Group, the firm founded by Steven Rattner, who in July resigned as the White House point man for the auto industry rescue. The contributions are legal, and the firms haven’t been accused of wrongdoing related to the giving.
The analysis of donations since 1998 showed the money flowed in 30 states to incumbents and candidates for governor, treasurer and other posts that influence billions of dollars in pension fund awards.
Several of the firms won pension investment work after they, their executives or hired intermediaries gave contributions. The awards generate lucrative fees and lend prestige that could help lure new clients.
The SEC is now interested in it, and of course Mary Schapiro has made comments to the effect that political donations shouldn’t effect investment decisions
As the article notes, there’s a proposal to impose a two-year ban on pension fund awards to advisers that have given more than $250 in campaign contributions to any public official able to influence the fund’s investments. The rule would cover donations to incumbents and challengers and would apply to investment executives, their firms and some employees. A similar SEC plan in 1999 didn’t pass.
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