N.J. Pension Sells Stake Under Review for Pay-to-Play

New Jersey’s $80 billion pension system has sold its $15 million investment in a venture-capital fund managed by General Catalyst Partners that the state treasurer is reviewing for potential pay-to-play violations.

The state Treasury’s Investment Division sought bids and received several offers for its stake, Director Chris McDonough said today during a regular meeting of the council that oversees the pension funds. The stake was sold on Sept. 5 to Washington University at a 5 percent premium to its net asset value, according to a council memo.

The sale, which comes before any finding of wrongdoing, marked another turn in the affair that involves an ally of Republican Governor Chris Christie and the firm, which says on its website it exists to support entrepreneurs.

Charles Baker, a Republican candidate for governor of Massachusetts, gave $10,000 to the New Jersey Republican State Committee on May 17, 2011, as an individual contribution, according to state election records. Baker’s employer was General Catalyst, according to the election commission’s database. Seven months after his donation, the Investment Council proposed a $25 million deal with the Cambridge, Massachusetts-based firm and ultimately invested $15 million.

Investment Professional

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.

Auditors for the Treasury Department are looking into whether Baker is an investment-management professional, according to an internal memo released in May by the council. Baker, of Swampscott, Massachusetts, is listed on General Catalyst’s website as an “entrepreneur in residence.”

New Jersey’s investment with General Catalyst was reported in May by Pando Daily, the California website that focuses on technology news. In a statement that month, company spokeswoman Michelle Daubar denied wrongdoing and said Baker had never been involved with managing funds.

“If he were to be found to be an investment professional, one of our remedies would be to sell,” Robert Grady, chairman of the council, said during the meeting. “So the position has now been sold.”

Grady, a top Christie economic adviser, declined to comment on the sale after the hearing. Joseph Perone, a Treasury spokesman, said the review is ongoing.

The Investment Division was recently contacted about selling its stake in General Catalyst and decided to seek multiple offers, Perone said. The interest was valued at $12.7 million as of March 31, and was sold for $14.1 million, according to the council memo.

“We selected the best offer and executed the sale and transfer of the asset for a meaningful profit,” Perone said in an e-mail. “We will redeploy that gain elsewhere for the benefit of plan participants.”

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