Erskine Bowles Broke Pay-to-Play Rules, Worker Group SaysNeil Weinberg
Former White House official Erskine Bowles was accused by a North Carolina workers’ association of violating political fundraising rules for money managers.
A firm Bowles co-founded was selected to manage state pension funds a few weeks after a June 2011 fundraiser for North Carolina Treasurer Janet Cowell was held at Bowles’ home, the State Employees Association of North Carolina said today in a whistleblower complaint to the U.S. Securities and Exchange Commission.
The event violated the SEC’s pay-to-play rule that bars investment advisers from overseeing state funds for two years following a campaign contribution to political candidates or officials in a position to influence the selection of money managers, according to SEANC’s complaint.
SEANC also questioned whether Bowles’ wife, Crandall Bowles, was in violation of pay-to-play rules because she is on the board of JPMorgan Chase & Co. The bank manages several hundred millions of dollars for the $87 billion North Carolina state pension fund, which Cowell oversees.
Erskine and Crandall Bowles have not been accused by regulators of any wrongdoing, nor has Cowell. The SEC typically vets whistleblower complaints before deciding whether to open a formal investigation. Carousel Capital, the firm Bowles co-founded, didn’t return a phone call seeking comment.
Schorr Johnson, a spokesman for Cowell, said SEANC’s claims are without merit. The Treasurer’s office obtained a legal opinion from outside counsel more than two years ago saying that the Bowles’ weren’t covered by the SEC prohibition, Johnson said in a statement. The Treasurer’s office also said it can withdraw its investment if Carousel fails to comply with the rule.
“Political issues have no role in investment decision-making,” Johnson said.
A phone call to the Bowles home wasn’t immediately returned. An e-mail to Erskine Bowles’ Carousel Capital address was returned as undeliverable. JPMorgan Chase spokesman Brian Marchiony declined to comment, as did SEC spokesman Kevin Callahan.
SEANC, which has been seeking details from Cowell about fees paid by the pension system to its money managers, requested that the SEC investigate the matter. Whistleblowers can be awarded between 10 percent and 30 percent of the money collected if the SEC files an enforcement action that results in more than $1 million in penalties.
“This is the type of abuse we were afraid we would find when we investigated the fees associated with our retirement system,” SEANC Executive Director Dana Cope said in a statement. “We won’t stand for our members’ retirement security and hard-earned money being used as a bargaining chip in a political game.”
Erskine Bowles in 1997 and 1998 served as chief-of-staff to then-U.S. President Bill Clinton. He later became the president of the University of North Carolina system and worked for President Barack Obama as the co-chair for his defecit reduction commission. Bowles is currently on the boards of Morgan Stanley and Facebook Inc.