Chevron Accuses State Comptroller DiNapoli of Ethics Violations

Chevron Corp., one of the world's biggest oil companies, has filed an ethics complaint against New York State Comptroller Thomas DiNapoli, who says the allegations are without merit.

(November 20, 2012) — One of the world’s biggest oil companies is accusing New York State Comptroller Thomas DiNapoli of using his political position to urge donations in connection with a massive international lawsuit. Yet DiNapoli has countered by denying the allegation, calling it an attempt of intimidation.

The complaint, filed by Chevron Corp. before the New York State Joint Commission on Public Ethics, accuses DiNapoli, who oversees the roughly $150 billion New York State Common Retirement Fund, of trading official actions for campaign donations in connection with a large international lawsuit. It seeks an investigation of DiNapoli as well as current and past members of his staff for multiple violations of New York Public Officers Law.

Chevron’s complaint relates to ongoing litigation in Ecuador and demonstrates how DiNapoli, while overseeing the New York State Common Retirement Fund that owns more than $800 million of Chevron stock according to SEC filings, allegedly breached his ethical and fiduciary duties. Under New York Public Officers Law, public officials are prohibited from having “any interest, financial or otherwise…which is in substantial conflict with the proper discharge of his duties in the public interest.” A statement by Chevron explains that Comptroller DiNapoli used his office to support the Ecuadorian plaintiffs’ lawyers’ scheme to pressure the oil giant into settling the lawsuit in exchange for benefits received from the plaintiffs’ representatives.

“The Comptroller’s continued advocacy has come despite repeated findings by US federal courts that the Ecuador litigation is tainted by fraud,” said Hewitt Pate, Chevron vice president and general counsel, in a statement. “Mr. DiNapoli’s actions serve only his political patrons, not the citizens of the State of New York or the beneficiaries of the Common Retirement Fund. This type of quid pro quo behavior is an apparent breach of ethical and legal responsibilities that warrants investigation.”

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DiNapoli has denied wrongdoing. “This is a baseless attempt by big oil to intimidate me and it won’t work. The allegations are without merit,” he said in a statement.

According to the comptroller, since 2004, the New York State Common Retirement Fund, along with dozens of leading investors worldwide, has called on Chevron to settle its nearly two-decade-long legal battle for polluting the Amazon. “This effort is about protecting shareholder value and fulfilling my fiduciary responsibility to the New York State Common Retirement Fund,” DiNapoli said. He added: “Instead of owning up to its corporate responsibility, time and again Chevron has denied its responsibility, distorted the facts and ignored the ruling of a court of law.”

Comptroller DiNapoli took office in 2007 after his predecessor, Alan Hevesi, departed under allegations of misconduct, including a pay-for-play scandal that resulted in a prison sentence.

Read Chevron’s full complaint here.

(November 20, 2012) — In the last five years institutional investors have roughly doubled their allocation to Commodity Trading Advisor (CTA) funds, which commonly advise investors on the use of future contracts, according to an in-depth analysis by research firm Preqin.

There are now 713 global institutional investors with an active CTA portfolio, a significant increase on 2011, when the number stood at 504, and 2008, when just 331 had CTA funds in their holdings, according to the research firm.

“CTA/managed futures have often been regarded as an ‘all-weather’ investment choice, with historical performance characteristics that make the strategy highly relevant during periods of relatively low returns and generally rising asset class correlations,” according to Amy Bensted, Preqin’s head of hedge fund products. “Year on year, more investors are adding CTAs to their portfolios of alternative asset funds in order to tap into this diversified liquid source of alpha. Correspondingly, more managed futures vehicles are being launched in order to cater to the growing interest in the strategy. Despite recent disappointing performance by CTA vehicles, investor interest in the strategy continues unabated with 14% of fund searches initiated in October 2012 including a managed future mandate.”

According to Preqin’s findings, 42% of funds of funds invest in CTAs. Public pension funds also show a strong appetite for CTA vehicles, Preqin found, with 25% having a preference for such funds. The largest number of CTA launches was noted in 2011: 165 managed futures programs tracked by Preqin were launched last year.

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In terms of performance, CTAs have returned 2% YTD and 0.35% annualized over the last 12 months compared to 6.32% and 8.02% respectively for the wider hedge fund industry.

The uptick in CTA popularity among institutional investors jibes with comments made by Agecroft Partners’ Don Steinbrugge, who has noted that the number of pension plans allocating to hedge funds has increased over the past decade, along with the percent of their average portfolio allocation. CTAs have only recently been accepted as a core hedge fund allocation among schemes to lower volatility, he says. While he finds Preqin’s expectations about CTA popularity “a little high,” he notes that more assets have gone to CTAs than any other hedge fund strategies since 2008. According to Steinbrugge, over $300 billion, or 15% of the hedge fund market, has been allocated to CTAs. “Public pensions like CTAs because they’re not correlated with other asset classes, and also because of their transparency and liquidity.”

See Preqin’s analysis here.

Steinbrugge says: “I’m seeing a big amount of search activity among public pension funds in North America. They’re looking for strategies not correlated to long-only benchmarks.”