As we reported earlier this week, “pay to play” allegations leveled against S.C. Treasurer Curtis Loftis appear to be nothing more than political payback from S.C. Gov. Nikki Haley, State Senator Greg Ryberg and powerful members of the S.C. Retirement System Investment Commission (SCRSIC).
Why? Loftis has been aggressively championing long-overdue reforms to this expensive, under-performing fund – and the powers-that-be in Columbia don’t like that very much.
But was there more to this “political hit” than just payback? Was there also a preemptive motivation in targeting Lofits? An effort to paint him with the “pay-to-play” brush before he could go public with a much bigger scam?
Damn straight there was …
As we reported in several news stories late last year, Loftis had been conducting an investigation into the administration of Bob Borden – the flamboyant, Lamborghini-driving former chief executive of the state pension fund. The scam Loftis was investigating allegedly involved Borden’s proximity to the New England Pension Consultants firm, a Cambridge Massachusetts-based investment outfit that does extensive business with the SCRSIC.
In fact, the New England Pension Consultants firm was contracted by the state to conduct due diligence on its various pension fund investment deals – although that didn’t always happen.
Why not? Because during his tenure as the head of the SCRSIC, Borden unilaterally exempted the New England Pension Consultants firm from providing oversight over the state’s estimated $12 billion worth of higher-risk “alternative investments.”
One deal in particular, the Lighthouse/ Apollo deal, involved a $3 billion investment that sources tell FITS could result in the state taking a “catastrophic loss.” This is one of the specific deals that the New England Pension Consultants firm was allegedly exempted from overseeing.
How was Borden able to pull such a feat off? That’s easy … he appears to have had an “inside man.” One of the New England Pension Consultants’ top executives – Rhett Humphreys – was Borden’s top assistant when the latter was head of the Louisiana State Employees Retirement System, a relationship that Loftis is said to have been zeroing in on as part of his investigation.
Why is Humphreys important? He’s one of the people currently pointing the finger of blame at Loftis. In fact, allegations originating from Humphreys appear to form the basis of the entire smear campaign against the Treasurer.
Pot, meet kettle … right?
As part of his investigation, Loftis submitted Freedom of Information Act (FOIA) requests to Borden’s office attempting to uncover specific information related to the alleged scam – but Borden refused to provide the documents.
Then, two months ago, he abruptly resigned.
Borden was paid $485,000 a year (not counting his government benefits) to run the pension fund. He was also in line to receive a one-day bonus of $66,000 last September but Loftis successfully blocked that payment. Borden did receive an $80,000 contract for two months of “consulting” work after he resigned, however, a shady deal that was approved by Haley’s appointee to the SCRSIC.
Another shady deal Loftis was investigating involved SCRSIC commissioner Reynolds Williams, who spent several months championing a $30 million timber deal that the commission approved late last year. At the last minute, Williams recused himself from voting on the deal. Why? Because his law firm had lined up a deal worth hundreds of thousands of dollars to represent the company receiving the payoff.
Amazing isn’t it?
Williams is another of the Columbia insiders pointing the finger of blame at Loftis. In fact, he had the audacity to impugn Loftis’ integrity to reporter Adam Beam of The (Columbia, S.C.) State newspaper, accusing the Treasurer of being a part of “some secret arrangement with some undisclosed people.”
Again … pot, meet kettle.
Corruption is obviously nothing new when it comes to the management of South Carolina’s pension investments.
In late 2010, FITS broke the story of a controversial pension fund takeover attempted by Borden in which state government would have created a new investment corporation that would manage up to $9 billion in retirement assets – including investments in South Carolina companies.
The new company – dubbed “NewCo” – would have employed 50 people and operated on an annual budget of $29 million, which ostensibly would have been paid for out of “savings” in investment fees. “NewCo” would have managed up to $6 billion in retirement assets almost immediately – while eventually managing up to $8.7 billion of the state’s $25 billion pension fund.
After the mainstream media picked up on the scam, though, the rats started scurrying from the ship.
Needless to say, the creation of this new entity was fraught with all sorts of ethical problems – most notably a complete lack of transparency and accountability at any step of the process. Basically, public employees’ savings would have been spent/ invested under the plan without their input … and with no oversight from either the legislative or executive branches of government.
That’s why the S.C. Budget and Control Board under former S.C. Gov. Mark Sanford rejected the scheme.
While Borden’s initial effort failed, he moved quickly to take the scheme “in-house.” Borden’s commission – which had a $5.8 million budget in fiscal year 2010-11 – convinced current S.C. Gov. Nikki Haley and our “Republican-controlled” S.C. General Assembly to appropriate another $5.5 million in the current budget. The agency recently upped their budget request to $19 million.
Of course that’s chump change compared to the $350 million in fees that our state is paying for this mismanaged, underperforming fund.
FITS is continuing to investigate this much larger “pay-to-play” scam. At this point, though, it’s clear that the broadside against Loftis was much more than just political payback – it was also a preemptive attack.