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Archive for the ‘Oregon-PERS’ Category

Just as Enron manipulated the power grid to create artificial profits, a private equity firm, Fortress, is now attempting the same game with key railroad infrastructure in the State of Oregon, and using Oregon Public Pension assets to do it. Oregon PERS invested an additional $125 million in Fortress in May 2007 (select May 2007 minutes), on top of $425 million already invested. Here are the details.

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Today the Oregon Investment Council (OIC) had its October 2007 monthly meeting and made additional committments to private equity, including $325 million to Oak Hill Partners on top of its original $100 million investment made to a partnership in which Robert Bass and Phil Knight are general partners. State Treasurer Randall Edwards, whose wife Julia Brim Edwards is a public communications director at Nike, was not at the meeting and therefore did not vote.

Pictured below is J Randall of Oakhill Partners making his proposal to Ron Schmidt, PERS Chief Investment Officer on left seated next to legal counsel.

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Today Parish & Company formally requested the SEC to suspend RiskMetrics IPO due to inadequate disclosure regarding both RiskMetrics and ISS ownership structure. Such disclosure is the heart of proxy rule regulations given proxy firms unique role in the marketplace.

In order to remedy this, RiskMetrics needs to file an ADV with the SEC and fully disclose its ownership structure and other key aspects covered in this standard ADV disclosure. Stating that it is owned by hedge funds or private equity firms is not adequate unless these firms in turn file separate ADV’s with the commission.

Both Gretchen Morgenson and Floyd Norris of the New York Times are copied on the following correspondence to the commission. More details are available on my blog at billparish.wordpress.com including October 10, 2007 blog post titled “Hedge funds Secret Sauce Going Public via RiskMetrics IPO.”

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In his recent $100 gift to the University of Oregon, Phil Knight stipulated that the gift was to cover operating expenses and not be used for constructing a new athletic facility. True to his accounting roots, Knight understands the importance of funding operating costs, rather than funding a building that has no operating budget. It was a brilliant forward thinking gesture.

Two aspects pertaining to the October 9, 2007 story in the Oregonian not discussed were Knight’s bitter conflict with the City of Beaverton’s attempt to annex Nike’s corporate campus and secondly Knight’s partnership with Robert Bass that received $100 in public pension assets (PERS) retirement funds to manage.

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Yesterday Ben Westlund announced he would run for State Treasurer as a Democrat. He had previously briefly run for Governor as an independent in 2006 against Governor Ted Kulongoski and before that was campaign manager for a Republican, Kevin Mannix, who ran and lost against Kulongoski in 2002.

Westlund eventually withdrew from the Governor’s race on August 10th, 2006, paving the way for Kulongoski’s victory by not siphoning off Democratic votes. Kulongoski now enthusiastically endorsed Westlund on the day he announced his candidacy for State Treasurer. Clearly, many wonder if a deal was struck when Westlund cut short his run for Governor.

A few questions Oregonians, both taxpayers and PERS participants, might ask include the following:

1) Will Westlund help reign in PERS aggressive moves into hedge and private equity funds and support a more balanced strategy than the current allocation of 73 percent stock and real estate and only 27 percent fixed income.

2) Will he fix the college savings plan by removing Oppenheimer (a plan set up by the current Treasurer Randall Edwards designed to please the investment industry) and add a more parent centric choice such as Vanguard as the primary vendor.

3) Will he raise serious conflict of interest issues involving the current Chairman of the Oregon Investment Council (OIC) Dick Solomon, a practicing CPA whose clients interests with OIC business, in addition to support rules requiring that lobbyists representing firms who seek funding before the council identify themselves. Sadly, Oregon PERS has become a cookie jar for the investment industry and if more difficult market conditions emerge, PERS participants may once again have to take large benefit cuts due to the overly agressive management of this $7o billion fund. Especially given the aggressive accounting practices employed by many of the private equity firms it has invested in, including KKR and the Texas Pacific Group.

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Yesterday the OIC met and awarded $1.2 billion in investment contracts. The meeting included a presentation from Leon Black (Pictured below) who is personaly worth $4-5 billion. Dick Solomon and Katy Durant both disclosed conflicts of interest, former OIC Chair Gerard Drummond was in attendance as was expected candidate for State Treasurer Ben Westlund. This was Westlund’s first OIC meeting. Here are my unofficial 9/27.07 OIC meeting minutes.  See OIC Commissioners below, left to right they chair Dick Solomon, State Treasurer Randall Edwards, Katy Durant and Harry Demorest, former managing partner of the Portland Arthur Andersen office.  Not pictured is Mark Gardiner, whose final meeting on the council was today.

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Today the Oregonian ran a story by reporter Jeff Mapes about SEIU President Joe DiNicola, Mapes noted that:

“The largest union for state employees in Oregon is embroiled in a messy political and legal struggle over a claim from its elected president for nearly $110,000 in back overtime pay. Outraged members of Local 503 of the Services Employees International Union, including several board members, launched a recall campaign against the president, Joe DiNicola. In turn, DiNicola is seeking a court order charging that union and government resources are being used to aid the recall, which SEIU denies. He also has filed a civil rights complaint charging he has been discriminated against for making his wage claim.”

Rather than engage in a conflict my advice would be for SEIU to cut the check for $110,000 with the stipulation that DiNicola advance two initiatives.

The first would be a natural for him, a tax auditor, and that would be to raise a discussion regarding the most abusive corporate tax loophole in 25 years, one that has both decimated union ranks through non sensical mergers and also short changed investors alike. Steve Duin referred to this tax loophole in an opinion piece and I also wrote about it in an article titled the “Amazing Carry and Tax Loophole Inside PERS” or Brainstorm NW magazine. If DiNicola is successful in closing this loophole the union could theoretically justify writing him a check for every dime it has and kissing his feet in gratitude because the net impact would be the preservation of millions of good jobs, a disproportionate share being union jobs.

The second recommendation to SEIU would be to encourage DiNicola to be more aggressive in representing issues key to domestic job growth at meetings of the Oregon Investment Council. This was not mentioned in the article by Mapes yet perhaps DiNicola’s most important activity of all is attending the monthly OIC meetings on behalf of SEIU, where the $70 billion of PERS investments gets awarded to various managers.

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