Gubernatorial Candidate Bill White Says Texas Investments Politically Connected, TRS Denies

(October 20, 2010) — Bill White, the Democrat challenging Perry in the November 2 election, has accused appointees of Gov. Rick Perry of pressuring the Texas Teacher Retirement System (TRS), which manages a trust fund valued at $102.4 billion, of making potentially risky investments that gave state business to politically connected companies.

In response to the allegations, TRS Executive Director Ronnie Jung hired an external party to investigate the concerns. “The investigation found no improprieties with respect to how the investment decisions in question were made,” the fund stated in a release. “The results of this investigation were also forwarded to the State Auditor’s Office. These actions were taken in accordance with TRS’ fiduciary responsibilities to our members and the Trust.”

The Washington Post reported that a 2009 government whistleblower memo, released by White’s campaign for governor and written by the retirement system’s former director of private market investments, claims that private investment firms whose executives made lofty contributions to Perry allegedly got special treatment at TRS, which experienced a recovery of 53% from a March 2009 value of $67 billion. The 2009 memo was written by the director of the system’s private markets team, Michael Green, to Linus Wright, then chairman of the board. It outlines instances in which Green asserts that Chief Investment Officer Britt Harris (profiled in aiCIO‘s upcoming issue) pressured staff members to set aside their objections to certain investments at the request of board members.

“Is it my imagination or does there seem to be a renewed urgency on Britt’s part to close a bundle of questionable transactions?” Green wrote in a February 2008 e-mail to a retirement system colleague that was included with the memo, the American-Statesman reported. The following day, Green continued: “The damage to our reputational equity and creation of a culture where board members feel empowered to finance their personal agendas with teacher/retiree/taxpayer $$$ don’t seem to concern him.”

The leaked memo explains that staff was pressured to reverse a negative recommendation to invest with Encap Energy Capital, whose top managers are major Perry political donors. Additionally, the memo asserts that staff was urged to approve investments from outside managers who had an outside “placement agent” — a major Perry donor.

In addition, an online blog today raised questions about TRS investment decisions related to Cintinela Capital Partners and Parrish Capital Advisors. “Contrary to what this blog implied, TRS made no investments in either company,” TRS stated.