Orin Kramer

State Sen. Bill Baroni (R-Hamilton) says that the State Investment Council's investment of hundreds of millions of dollars in pension funds related to a company whose founder started a hedge fund that Governor Corzine invests in demonstrates at least "the perception of politics" in how the state chooses to invest.

Baroni pointed to three funds the state invests with related to Texas Pacific Group (TPG), which shares an address with TPG-Axon, a hedge fund Corzine personally invests in.  Republicans insist the two funds are related, though Corzine and spokesmen for TPG and TPG-Axon say they're administered completely separately.  

"People can make all kinds of arguments about this fund that name and their offices are right next to each other but they don't know each other. That may work on Wall Street, but that does not work on Broad Street in Hamilton," said Baroni in a conference call with reporters.

Baroni said that the investment is an effect of a policy shift that the State Investment Council undertook in 2005, in which they have hired more outside money managers to invest state funds.  It's a policy of diversification that the leaders of the council champion, though Baroni argued that it "opened up the door to the perception of politics."

"That door has now been kicked in," said Baroni, who represents the legislative district with the most public workers in the state. 

The decision to make a risky investment of the $180 million magnitude of the Lehman purchase was clearly not made without the input of some appointee of the Corzine administration. Yet, one year later, the Treasurer continues to insist that the investment was solely the decision of low-level employees of the Division of Investment who are being demoralized by questions about the $118 million loss.

New Jersey Investment Council Chairman Orin Kramer says the state's pension fund - under attack by Republicans for losing $118 in a Lehman Brothers investment - lost less over the last year than the funds of the 30 other states who make the information available on the Internet.

Kramer made the argument in a letter to state Sen. Joseph Pennacchio (R-Montville), who has been a vocal critic of the State Investment Council's decision to invest in Lehman shortly before it collapsed.  It was a response to a letter Pennacchio wrote to State Division of Investment Director William Clark to question why the state would not reveal which in-state companies the fund invested in as part of the two-year-old NB/NJ Custom Investment Fund program. 

In an interview with PolitickerNJ.com, Kramer said that the ranking is vindication of his strategy to diversify the state's holdings - a strategy that the Lehman investment ultimately came out of -- and that politicizing the council will jeopardize its future performance.

"The portfolio diversification that made that possible has been under political attack," said Kramer.  "When people make the pension system a political football, seeing that kind of ranking again becomes harder and harder to achieve." 

Although the state's pension fund lost 14.2%, or $10.9 billion, between June, 2008 and June, 2009, the average for the other states was 18.8%.  North Carolina tied New Jersey, also losing 14.2%. 

The state is currently suing Lehman Brothers' former executives and directors, alleging that the company misrepresented its financial position when the state made its $182 million investment in Lehman shares. 

"An irony about Lehman Brothers is that a major source of New Jersey's outperformance arose from underweighting financial services companies.  For every investor, some decisions produce atrocious outcomes," wrote Kramer in his letter to Pennacchio.  "While the State believes it was misled in making that decision, Lehman was obviously one of those atrocious outcomes."

Two Republican state senators renew their call for immediate pension hearings by a bipartisan commission with the power to subpoena witnesses. New Jersey taxpayers, firefighter, teachers and public employees need to know beyond a shadow of a doubt that the same politically connected Wall Street financiers that preyed on New York and other state pension funds didn't exploit New Jersey's pension system as well.

Senator Joseph Pennacchio, R-Passaic and Morris, is requesting that the members of the Senate Judiciary Committee agree to thoroughly question three members of the State Investment Council, which sets policy for state pension investments, before signing off on their reappointments by Governor Corzine..

The state's suit against Lehman Brothers will not provide the answers that taxpayers and retirees need to be certain that the state is competently managing the billions of dollars of hard earned money that is being placed in its care.

Republican gubernatorial candidate Christopher Christie said today that Gov. Jon Corzine's reappointment of three members of the State Investment Council, which has presided over a multi-billion loss in state pension funds, is "another example of a failure of accountability in this state government."

Corzine this week reappointed Jose Claxton, Montgomery Cerf and Erika Irish Brown to the council, which has taken heat from Republican legislators for overseeing the loss of about $25 billion, including a $178 million investment in the failed Lehman Brothers investment firm.  The three members who Corzine reappointed took extra heat from state Sen. Joseph Pennacchio (R-Montville) for that investment because of their past ties to the firm.

"For seven years as U.S. attorney my job was to make sure people were held accountable to the law.. You have to hold people accountable to the task they're given, and I'd ask whether or not the performance of those folks was laudable, and by reappointing them he's holding them accountable," said Christie in response to a question from PolitickerNJ.com.  "I would say no. and the fact of the matter is there are a lot of questions that should be asked before any of these people are reappointed, and I think they should be asked under oath."

Thee wrangling over the aftermath of the state’s decision to invest $178 million in Lehman Brothers stock before the company collapsed took a messy turn today.

A complaint about a perceived lack of response to an OPRA request filed on behalf of state Sen. Joe Pennacchio turned into a debate on whether Pennacchio was putting the diversity of the State Investment Council in jeopardy.

In a press release, Pennacchio accused the Treasury Department of stonewalling a Republican staffer’s OPRA request, saying that it was ironic that the department was more concerned about collecting $79.50 in OPRA-related costs than investigating why it invested millions in a troubled company.

“It is obvious that we are being stonewalled,” said Pennacchio. “New Jersey’s citizens have a right to know why and how the Investment Council lost $115 of $178 million invested in a short period of time this summer prior to the sub-prime market collapse. The Lehman’s investment had huge risks and there were obvious personal ties to the New Jersey Investment Council when this failed decision was made. I wish the Treasury was as concerned with the $178 million investment as they are with getting $79.50 from an elected official doing his job.”

New Jersey State Investment Council Chairman Orin Kramer

Hedge fund manager Orin Kramer, who heads the New Jersey Investment Council, wants to set the record straight: the state pension fund’s losses would have been worse if he hadn’t begun diversifying its portfolio six years ago.

Kramer disputed a report that appeared on PolitickerNJ.com last week that contended he presided over the loss of $25 billion from New Jersey’s pension fund.  Upon taking the post in 2002, Kramer said that he recognized the need to for the state’s multi-billion dollar fund to diversify its holdings.  New Jersey, he said, stood alone in the proportion of stocks to other assets that its pension fund held.

“The reason that I joined the council is because New Jersey had the most undiversified, equity-heavy portfolio of any major comparable institutional fund in the country,” said Kramer.  “Compared to every major endowment, corporate pension fund and public pension fund, New Jersey was uniquely undiversified and heavily dependent on equities.”