Texas AFT Retirees’ Concerns Over Politically Influenced Investment of Pension Funds Draw Media Attention to a Pattern of “Questionable Dealing”

Yesterday’s call by retired Texas AFT members in Dallas for a genuinely independent, impartial investigation of alleged political influence over the investment of their Texas Teacher Retirement System pension fund has set off media reverberations statewide.

In Austin, the main daily newspaper gave the story front-page treatment, in a story entitled “Teachers, retirees question independence of pension fund investigator.” An abbreviated version of this American-Statesman story was carried statewide by the Associated Press.

The Austin American-Statesman report offered new information bolstering retirees’ concerns. It turns out that the supposedly “independent” investigator chosen by TRS to look into a whistleblower’s allegations of improper, politicized investment decisions was not so independent after all. The law firm of Roel Campos was already the beneficiary of an $820,000 contract with TRS to provide advice on investment matters at the time he was chosen to conduct the inquiry for TRS. His inquiry found “no definitive evidence” of political misuse of the pension fund to favor certain investments, some of which involved big givers to Gov. Rick Perry’s political campaigns.

The newspaper report continued: “Linda Bridges, president of the Texas affiliate of the American Federation of Teachers, said the report’s findings are not credible because of Campos’ involvement. ‘If you want to control the situation, you control who does the work,’ Bridges said.”

Texas AFT and retired education employees already had ample questions about the credibility of this TRS internal investigation in light of an earlier episode involving Roel Campos and his law firm. As the Austin paper reported, “In 2008, Campos’ firm was the beneficiary of a controversial board decision to oust the fiduciary counsel who had served the fund for the previous 12 years. The fiduciary counsel provides legal guidance on ethics and governance issues.

“But the contract for Cooley Godward Kronish LLP [Campos’ firm] was scuttled by the Texas attorney general because of concerns about potential conflicts of interest with the firm’s existing clients, some of whom were venture capital firms.

“Cooley Godward withdrew from the fiduciary counsel job in November 2008.

“A few weeks later, the retirement system submitted the firm for another job providing legal advice on investment matters.

“The switch was mentioned at a board meeting, but the firm did not go through the normal hiring process for the investment counsel job. The 28-month contract is worth up to $820,000.”

The Dallas Morning News, in an editorial published Monday, summed up the implications of the affair with this headline: “The Perry Machine: Pension fund charge another strike against governor.” The editorial quoted the TRS whistleblower’s warning about the “creation of a culture where Board members feel empowered to finance their personal agendas with teacher/retiree/taxpayer $$.”

The Morning News editorial team linked the TRS story to other questionable dealings in which Perry allies appeared to benefit from state largesse, such as investments in private ventures chosen by the Texas Emerging Technology Fund. The editorial rightly noted that there is extra cause for concern when it comes to the pension fund for Texas school employees. “The wrong decisions could cost teachers their retirements and soak the state for billions of pension liabilities. The stakes are so high that political friendships should never be a consideration,” said the Morning News, and “even injecting a hint of politics into the investment decisions of a key pension fund is dangerous on its face.”

The Dallas newspaper concluded that the pattern of questionable dealing involving politicized decision-making at various state boards under Rick Perry’s governorship “confirms why 14 years entrenched as governor would be too long for Perry.”