Union Files State Ethics Complaint Alleging Pay-to-Play Violation by Administration

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The AFL-CIO filed a complaint with the State Ethics Commission September 5 claiming that a key adviser to Gov. Chris Christie who is in charge of the agency that oversees pension investments may have violated state pay-to-play laws by awarding lucrative pension fund management contracts to top political donors of the Governor.

In an 11-page letter submitted Friday, New Jersey AFL-CIO President Charles Wowkanech said that the chair of the State Investment Council, Robert Grady, “has violated the Division's own rules barring politics in the selection and retention of such funds and investments, and has further created an appearance of impropriety.”

Specifically, the New Jersey AFL-CIO claims fees paid to politically connected fund managers have more than tripled under Christie, to $398 million last year alone. Many of the state’s relationships with Wall Street firms coincide with generous political contributions, even though state ethics rules require a two-year lag before a donor can be a pension investor. 

“Despite clear boundaries created to shield pension investments from the influence of politics, it appears that the State Investment Council under Robert Grady’s direction and the Christie administration’s leadership clearly violated those rules,” said Wowkanech in the complaint. “We urge the State Ethics Commission to investigate this pay-to-play scheme on behalf of taxpayers who are footing the bill for this abuse and pensioneers being shortchanged of their retirement funds.”

The complaint also claims that conflicts were especially evident during Christie’s re-election campaign when the chair of the State Investment Council Robert Grady was ordered to participate in weekly conference calls involving high-level re-election and political matters with Christie’s top campaign staff.

 “The presence of the State Investment Council chairman on those calls violated the rules designed to protect investment decisions from being influenced by politics,” said Wowkanech. “This serious matter affecting the pension benefits of countless current and retired former employees warrants a thorough investigation, based on evidence in the complaint that Bob Grady and Christie’s re-election team clearly used pension investments as a way to attract political contributions.”

At issue is the state's investment of hundreds of millions of dollars of pension money with Wall Street firms, including hedge funds and other types of “alternative investments” that charge higher fees than more traditional types of investments — a practice that started before Christie was governor but has increased under him.  The complaint is based on a series of reports on the websites Pando Daily and International Business Times, written by the reporter David Sirota, that explain the pension fund's increase in alternative investments since Christie took office.

Grady, who was an adviser to Christie before he was named to the unpaid chairmanship of the investment council, declined to comment to the Star Ledger on the ethics complaint. But in an email Grady wrote in August to the International Business Times that was provided to the Star-Ledger, he addressed its questions.

“Before participating in any phone calls, and before agreeing to serve as a volunteer senior policy adviser to the Governor during his campaign, I requested in writing, and received in writing, approval from the Ethics Officer of the New Jersey Department of the Treasury,” Grady wrote. “At no time was the New Jersey pension fund discussed or was any manager hired by the New Jersey pension fund discussed. At no time was any pension business or any pension investment decisions discussed on these calls.”