N.J. Investment Council Reviewing General Catalyst Deal

The New Jersey Investment Council, which oversees the $76.8 billion public-pension fund, is looking into whether a deal with venture-capital firm General Catalyst Partners violated the state’s pay-to-play rules.

The review involves Charles Baker, 57, a Republican candidate for governor of Massachusetts and an ally of New Jersey Governor Chris Christie. On May 17, 2011, Baker gave $10,000 to the New Jersey Republican State Committee as an individual contribution, according to New Jersey Election Law Enforcement Commission records.

Baker’s employer was General Catalyst, according to the election commission’s database. Seven months after Baker made the donation, the New Jersey Investment Council proposed a $25 million deal with the Cambridge, Massachusetts-based firm and ultimately invested $15 million.

New Jersey’s pay-to-play rules forbid the investment council from doing business with firms, or their management professionals, if they have made in-state political donations within two years of a proposed transaction. Details of Baker’s donation, and New Jersey’s investment with General Catalyst, were reported earlier this month by Pando Daily, the California-based website that focuses on technology news.

“These concerns and questions are without merit,” according to a statement from General Catalyst dated May 15 provided by spokeswoman Michelle Daubar in response to an e-mailed request for comment. “General Catalyst did not ‘pay to play’ or violate the law.”

Entrepreneur in Residence

Auditors for the state Treasury Department will determine whether Baker is an investment-management professional, according to an internal memo released today by the investment council at its meeting in Trenton.

A disclosure report submitted by General Catalyst and covering Dec. 15, 2009, to Dec. 15, 2011, “did not list any political contributions and did not list Mr. Baker as an investment management professional,” according to the memo.

Baker, of Swampscott, Massachusetts, is listed on General Catalyst’s website as an entrepreneur in residence.

Baker “has never been involved with the management of General Catalyst,” according to the company’s statement.

The role of executives in residence is “to get actively involved with a limited number of portfolio companies, and to bring their executive and operational expertise to operating businesses and mentoring executives -- not managing or advising the venture firm or its funds.”

Baker is facing a primary challenge from Mark Fisher, who is affiliated with the Republican’s Tea Party faction. Five Democrats and three third-party candidates also are running for governor. In an unsuccessful gubernatorial run in 2010, Baker modeled himself as a tough talker like Christie, who helped raise money for his candidacy.

A message left on the Baker campaign’s voicemail wasn’t immediately returned.

To contact the reporter on this story: Elise Young in Trenton at eyoung30@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Chapin Wright, Alan Goldstein

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