By Paul Gable
For those of you who may have missed it over the Easter weekend, SC Attorney General Alan Wilson cleared state Treasurer Curtis Loftis and Mallory Factor of any wrongdoing in an alleged “pay to play” scheme involving the nearly $25 billion state retirement fund.
This story began in November 2011, when South Carolina Retirement System Investment Commission CEO/CFO Robert Borden was under fire from Loftis for his outrageous salary ($485,000 per yr.) and Lamborghini driving flamboyancy while overseeing the underperforming agency.
Loftis has been a critic of the management of the state’s pension fund for much of his 15 months as treasurer. On January 31, 2012, Loftis outlined problems associated with the pension fund during testimony to the Senate Finance Retirement Committee.
Among those problems, Loftis listed the $25 billion pension fund is underfunded by approximately $13 billion dollars (33%) in order to meet its future liabilities; full-time employees of the pension system have risen from three in 2006 to 23 currently; investment management fees have rocketed from $31 million in 2005 to $343 million 2011 and the fund has consistently underperformed with respect to similar pension funds in other states over the past five years.
One day later, the Associated Press broke the story “Pay for Play scheme probed at state’s $25 billion retirement system”. The first paragraph said SLED had launched an investigation while the second paragraph read, “The investigation was started after at least two financial management firms said they were promised they could manage a piece of the retirement fund, earning lucrative fees, if they paid money to a friend of state Treasurer Curtis Loftis.”
The investment commission allegedly received two sets of phone call notes from 11/15/2011 transcribed by Ashli Aslin and Rhett Humphreys. Both Aslin and Humphreys are employees of New England Pension Consultants, an investment firm with connections to the SCRSIC. Additionally, Humphreys was Borden’s number two man when both worked for the Louisiana state employees retirement system prior to Borden coming to South Carolina and Humphreys moving to NEPC.
Loftis, dissatisfied with the performance of the retirement fund under Borden’s management, caused Borden to lose his high paying job. Humphreys with Borden’s ouster sees the loss of a $600,000 fee from the SCRSIC in the near future.
The only possible answer? Smear Loftis and Factor with allegations of a” pay to play” scheme allegedly orchestrated by the them.
Two months later, this has been determined to be nothing but political infighting in Columbia over the influence and fees that are associated with managing large sums of public dollars.
The statements below were issued by Factor and Loftis after the AG decision.
MALLORY FACTOR STATEMENT
I am thankful that the Attorney General has today rejected as completely baseless earlier innuendoes, from persons hiding behind a cloak of anonymity who attempted to besmirch my reputation and the reputation of others.
When those un-sourced suggestions led to the Attorney General’s review, the perpetrators maliciously sought to short-circuit the lawful process by illegally leaking anonymous documents and executive session deliberations of the Retirement Investment Commission in an attempt to discredit me and others seeking to improve the financial performance of our State employees’ retirement assets.
Now, after full review by the State Law Enforcement Division and the Attorney General’s office, with which I cooperated, it is the innuendoes and their still anonymous sources that are discredited; and it is their deceit that is brought to light.
As Supreme Court Justice Brandeis once remarked, “Sunlight is said to be the best of disinfectants.” The infection here is bred of an entrenched bureaucracy and too-cozy relationships that endanger South Carolina and its taxpayers to the tune of billions of dollars. We can all hope that the infection can now begin to be cleared away with the sunlight of the investigation’s conclusion.
CURTIS LOFTIS STATEMENT
“Today’s release is a major victory for transparency and accountability, the state taxpayers, public servants and retirees. This effort by my political opponents to inject the legal process into a political battle over how public funds are invested was shameful.
“When I began asking questions about the pension funds’ fees and expenses, I was denied important information. My political opponents tried to have me, the only elected official on the pension oversight commission, removed, but that effort was soundly defeated in a 34 to 10 vote in the State Senate. Their scheme to involve the state’s legal system in an effort to halt my demands has now been laid to rest even though their scheme has cost me more than $10,000 in personal funds for legal representation.
“The oath of office requires that I serve the people of South Carolina first and worry about my personal political wellbeing last. Political roadblocks will persist as long as I fight for financial transparency and accountability for public money whether at the pension fund, Department of Transportation or any other state agency. These roadblocks will not stand in the way of my efforts for transparency and accountability.”
Loftis and Factor have been determined to be innocent of doing anything other than attempting to fix a problem created by the ‘good ole boy’ system. We hail the announcement for Loftis and Factor, but the problems with the pension system remain.
This is what happens routinely in South Carolina politics at both the state and local level. The ‘good ole boy’ system of “like minded” individuals perpetuate the back room deals so they can benefit from the public trough . When a person is elected to office who takes his oath of office seriously and wants to reform the graft and corruption in the system, he or she is either co-opted by the system or made a target to be gotten rid of one way or another.
We see it at the state level with Loftis. We see it at the local level every day and there will be much more to come as the election season gains momentum from now through the fall elections.