chris-christieNew Jersey and federal pay to play rules have a very clear purpose: To prevent executives at financial firms that do business with the state from making contributions to New Jersey politicians or political organizations that operate in New Jersey.

Over the past few weeks, Pando has reported several cases where New Jersey’s rules have, at best, been ignored and, at worst, clearly violated in the awarding of pension management contracts to political donors. Throughout our reporting, and as New Jersey’s pension crisis is now making national headlines, the one question we’re most frequently asked is: How widespread is the problem?

Today, after a two month investigation, we answer that question.

Below is a spreadsheet showing that political donors associated with 43 financial firms managing New Jersey pension money have spent a total of $11.6 million on contributions to New Jersey politicians and to major political organizations operating in New Jersey elections.

Many of those donations have gone directly to Gov. Christie’s election campaign and to the New Jersey Republican State Committee. Additionally, many of the contributions came either just before or just after the Christie administration awarded the firms multi-million-dollar pension management contracts. Indeed, Christie officials have given many of the firms that have made the donations additional pension investments, often worth hundreds of millions of dollars.

In total, New Jersey government data show that the 43 firms now manage roughly $14 billion worth of New Jersey state pension money.

To produce our report, Pando evaluated campaign contributions from donors associated with every hedge fund, private equity firm and other so-called “alternative investment” firm that the New Jersey Division of Investment says is managing pension state pension money. Pando’s analysis also includes other more traditional investment management firms that the division also says is providing financial services to the state pension system.

We cross referenced those firms with campaign contributions to all New Jersey politicians and state parties. We also evaluated all contributions to the Republican and Democratic governors associations and to the Republican National Committee because those organizations spend heavily in New Jersey state elections. We did not include contributions to the Democratic National Committee because campaign finance records show that in the timeframe evaluated, the DNC has not spent heavily in New Jersey state elections (as the Newark Star-Ledger put it in 2013, the DNC “has had little presence in New Jersey”).

The data includes all campaign contributions from donors whose campaign disclosure forms list firms doing business with the pension fund as their employer.* It also includes investment management professionals who are close family members of executives at those firms. The data goes back to 2009 when Christie first ran for governor. For each investment company, we include all contributions two years prior to New Jersey investing public money in the firm. That two year window is relevant because that is the so-called “look back” period that New Jersey Division of Investment rules prohibit campaign contributions from being made.

More than $60,000 to New Jersey politicians

On top of SEC pay to play rules and New Jersey pay-to-play statutes, the New Jersey Division of Treasury’s anti-corruption rules bar state officials from offering pension management contracts to a firm if “the investment management firm (or) any investment management professional associated” with the firm makes “any political contribution” to any “incumbent, candidate or successful candidate for Governor or for a seat in the Legislature.” The rules apply to contributions both before a contract is signed and “during the term” of a contract. The rules also include provisions restricting certain kinds of contributions from family members of executives at firms doing business with the pension fund.

Yet, according to New Jersey and Federal Election Commission documents analyzed by Pando, $60,522 worth of donations were made to New Jersey state politicians from donors listed as employees of 12 financial firms currently managing New Jersey pension money. Seventy-two percent of that $60,522 went to New Jersey Republican state lawmakers. That includes $31,345 to Christie’s election campaigns.

That money to Christie came from donors listing a total of seven firms as their employer. Since 2009, the Christie administration has proposed an additional $2.9 billion in state pension investments with those 7 firms. Today, according to Division of Investment documents, those 7 firms manage more than $4 billion of New Jersey pension money.

Here are some examples of timelines of political contributions and New Jersey pension contracts:

- In 2009, three donors listing their employer as Goldman Sachs gave Christie a total of $5,900. In March of 2010 – just months after Christie took office – the New Jersey State Investment Council proposed a new $250 million investment in Goldman Sachs. Meanwhile, in 2012 and 2013, Christie received a total of $7,000 from two donors whose employer is listed as Goldman. The contributions came despite Goldman managing New Jersey pension money since February of 2006. Among the Goldman donors to Christie is Donald Himpele, who is listed as a Managing Director in the firm’s annual report; and George Lee, who Business Insider describes as “partner and co-head of global technology, media and telecom banking at Goldman Sachs.”

- New Jersey campaign finance documents show that Garrett Moran, who Fortune magazine tells us served as a COO in Blackstone’s private equity group, gave Christie $1000 in February of 2009. According to New Jersey Division of Investment documents, Blackstone has managed New Jersey pension money since 2005. Additionally, the Christie administration proposed new investments in Blackstone in July of 2011, December of 2011 and March of 2013.  A Blackstone spokesman told Pando that Moran’s contribution “was made in error” and that “the check was returned.” However, Pando could find no recording of that returned check on the New Jersey Election Law Enforcement Committee’s website.

- Between 2009 and 2013, donors listing Credit Suisse, JP Morgan, Guggenheim Partners and Gleacher as their employer have given Christie and other New Jersey Republican state lawmakers a total of $16,755.  The contributions were made despite those four firms doing business with New Jersey since before Christie was governor. According to Division of Investment documents, those firms today manage more than $1 billion of state pension money.

These examples and contribution figures are on top of another tranche of contributions to New Jersey Republicans by financial executive Jon Lubert, who is the the son of one of the principals of Lubert Adler — a firm that received $100 million of New Jersey pension money in 2010. That year, the younger Lubert made a $2,000 contribution to the New Jersey Republican State Committee and a $2,600 contribution to Republican state senator Thomas Goodwin. In 2012 and 2013, campaign disclsoure records show Jon Lubert also made combined contributions of $7,600 to Chrstie’s reelection campaign.

In response to Pando’s request for comment, Jon Lubert said “I believe the law only prohibits children that live with the restricted person from making contributions.”

In fact, the rules bar executives at firms doing business with the pension from “fund(ing) political contributions or payments to a political party made by third parties, including consultants, attorneys (and) family members.” They also bar contributions from “any person associated with an investment management firm who is primarily engaged in the provision of investment management services.”

On the question of whether Jon Lubert is “associated with” Lubert Adler, Jon Lubert acknowledged that his firm is located in thee same building as his father’s, but said his firm is “completely separate” from Lubert Adler. The rub: he emailed these statements in response to questions sent to him via an email address in his name at Lubert Adler.

More than $148,000 to New Jersey State parties

In addition to SEC rules, New Jersey Division of Investment rules prohibit pension investment contracts from going to firms whose finance professionals have made contributions to New Jersey state political parties. The rules cover “any investment management professional associated with” firms doing business with the pension fund. The rules also apply to contributions from those providing “financial advisory or consultant services” to firms doing business with the pension fund.

Yet, according to New Jersey and FEC documents, those listing such firms as their employers have donated $148,700 to New Jersey state parties since 2009. Of that, 83 percent – or $123,500 – has gone to the New Jersey Republican State Committee. Those GOP donations have come from employees of 5 firms that together manage more than $3 billion of New Jersey pension money, according to Division of Investment documents.

The highest profile example of how these contributions may run afoul of federal and state pay to play rules comes from the now-famous saga of General Catalyst’s Charlie Baker making a $15,000 contribution to the New Jersey Republican State Committee months before the Christie administration gave General Catalyst a multi-million-dollar pension management contract. Here are some other examples that Pando’s investigation has uncovered:

- Between 2010 and 2012, documents show Samuel Cole of State Street gave the New Jersey Republican State Committee $80,000 ($60,000 plus $20,000 to the party’s federal account). The contributions came despite the pension fund investing in State Street’s Institutional Liquid Reserves Fund since at least February 2011. According to a State Street press release, Cole was a State Street vice president working specifically for State Street Global Markets, LLC. That is the same division of the firm that State Street lists as the distributor of the Institutional Liquid Reserves Fund that New Jersey invests in. Additionally, Division of Investment documents show the pension fund uses State Street for financial custodian services.

- A New Jersey campaign finance document from 2011 shows a $15,000 contribution to the New Jersey Republican State Committee from Greg Onken. The document lists JP Morgan as Onken’s employer. JP Morgan Securities’ website lists Onken as “a Managing Director and Financial Advisor.” New Jersey Division of Investment documents show JP Morgan currently managing $50 million of New Jersey pension money. Those documents say the investment in JP Morgan investment began in June 2006.

- New Jersey campaign finance documents show that Anthony Grillo gave the New Jersey Republican State Committee $10,000 in November of 2011. The documents list Blackstone as Grillo’s employer. The Grillo contribution came less than a month before Christie’s pension officials proposed a new Blackstone investment in December 2011. A Blackstone spokesperson asserted to Pando that Grillo no longer works for Blackstone, and did not work for the firm at the time of the contribution.

Of the $148,700 donated to New Jersey political parties, $33,500 went to those parties’ federal accounts. One legal expert Pando contacted said that those specific contributions (as opposed to the other contributions to the state accounts) are permissible under SEC rules. By contrast, former Assistant U.S. Attorney Melanie Sloan, now with Citizens for Responsibility and Ethics in Washington, told Pando that the New Jersey Department of Treasury rules “prohibit contributions to political parties, meaning any party or committee organized in the state and (these contributions) would qualify.”

More than $7.1 million to the Republican Governors Association, which is run by Christie

The Wall Street Journal has reported that in 2009 and 2013, the Republican Governors Association spent a combined $9 million to help elect and reelect Christie governor. That is part of its mission to, in an RGA spokesman’s words, “elect and support Republican governors.” In between his elections, Christie first served on the organization’s executive committee and then served as vice chair of the organization. As of late 2013, he is is now the RGA’s chairman.

Federal and New Jersey pay to play rules include so-called anti-circumvention provisions designed to prevent campaign contributions to outside groups from effectively going around aforementioned bans on such donations. In the words of the SEC rule, it is “unlawful for an adviser or any of its covered associates to do anything indirectly which, if done directly, would result in a violation” of the pay to pay regulations.

Yet, despite those anti-circumvention provisions, employees of firms managing New Jersey state pension money have made $7.1 million worth of donations to the RGA since 2009. Many of those contributions came into the organization either while Christie was leading the organization and/or while he was benefiting from the organization’s spending in New Jersey to support his election campaigns.

Once again, examples of donations in comparison to pension contracts is illustrative:

- Two days after Christie was elected vice chair of the RGA in 2011, Elliott Associates’ Paul Singer made a $250,000 contribution to the organization. Less than a month after the RGA donation, Christie officials proposed a $100 million pension investment in Elliott Associates. As previously recounted by The Nation’s Lee Fang, Singer’s donation to the Christie-run RGA was one of many such RGA donations by Singer.

- In 2012, two months after New Jersey invested $150 million in pension money in a fund managed by Lazard Asset Management, Herbert Gullquist made a $25,000 contribution to the RGA while Christie was vice-chair. Gullquist made another $25,000 contribution to the RGA in 2013 while the organization was spending heavily to support Christie’s reelection campaign in New Jersey. FEC documents list Gullquist’s employer as Lazard, and Crain’s reported in 2013 that Gullquist is “a senior adviser at Lazard Asset Management, a New York-based company he co-founded.”

- In March 2011, New Jersey proposed investing $100 million of pension money with Dan Loeb’s firm, Third Point. That was just four months after Loeb made a $300,000 contribution to the RGA. Additionally, while Christie was vice-chair of the RGA in 2012, Loeb gave the organization $250,000. Loeb also gave another $250,000 to the RGA in 2013 while the organization was spending heavily in New Jersey to support Christie’s reelection campaign.

- In October 2012, IRS documents show that the firm Perella Weinberg made a $25,000 contribution to the RGA, while Christie was RGA vice chair. Seven months later, Christie officials proposed a $100 million New Jersey pension investment in the firm’s real estate fund.

For its part, the Christie administration has declared that when it comes to RGA contributions, it will not enforce the anti-circumvention provisions in stay pay to play rules. Indeed, in 2013, the Bergen County Record reported that the Christie-controlled Election Law Enforcement Commission unilaterally deemed such contributions “legal because the governors’ group is bound by federal regulations, not state law.”

However, watchdog groups have suggested other agencies that are independent from the Christie administration may have the authority to enforce the anti-circumvention provisions.

Millions to the RNC, which financed and ran large portions of Christie’s election campaigns

Along with the aforementioned anti-circumvention provisions, New Jersey pay to play rules bar pension investment contracts from going to firms whose financial professionals have made donations to “political committee organized in this State.” The RNC’s extensive operations in New Jersey raise questions about whether it fits that definition.

In 2009, for instance, the RNC publicly bragged about spending $4.1 million in New Jersey, and about organizing “over 2 million volunteer phone calls and doors knocked” in the state.

Likewise, in 2013, the Newark Star-Ledger published an article headlined “Republican National Committee foots the bill for Christie’s voter turnout operation.” Noting that the RNC’s operations were headquartered next door to Christie’s campaign, the article quoted Christie’s campaign manager saying the group “work(s) alongside Christie for Governor people, they work alongside Republican state Senate campaigns whether incumbents or challengers, they work with county freeholder candidates, all the way down to mayors.” That is corroborated by New Jersey state campaign reports in which the RNC details how it funnels money to New Jersey county parties.

Yet, despite the pay to play rules and the RNC’s extensive on-the-ground operations in New Jersey, campaign finance disclosures show employees of 40 firms doing business with New Jersey’s pension fund have made $3.9 million worth of campaign contributions to the RNC over the last 5 years. Roughly $119,000 of those contributions came in 2013. That year is significant – it was after the RNC was spending money on presidential and congressional elections, and precisely when the RNC was publicly bragging about spending donors’ money in New Jersey, whose state elections are among the very few that take place in odd-numbered years.

The Christie administration proposed an additional $3.7 billion worth of pension investments in the eight firms listed as the employers of the donors who made those 2013 contributions to the RNC. Again, timelines of pension investments and contributions are illustrative:

- In June 2013, FEC records show that Northwood Investors COO Erwin Aulis made a $25,000 contribution to the organization. Five months after that RNC contribution – and just a week after Christie’s reelection – Christie officials proposed a new $200 million state pension investment in a fund run by Northwood Investors.

- In August 2013, as the RNC was gearing up in New Jersey on behalf of Christie, FEC records show Steven Einhorn of Omega Advisors made a $32,400 contribution to the organization. The contribution came just months after Christie officials proposed a new $150 million pension investment in a fund run by Omega Advisors.

- FEC records show that Warburg Pincus CFO Timothy Curt made a $25,000 donation to the RNC in February of 2013. That donation came less than a year after the Christie administration proposed a $300 million investment in Warburg Pincus’s private equity fund.

Democrats also implicated

Federal and state campaign finance records show that of the $207,222 given to New Jersey politicians and parties by employees and associates of firms doing business with the New Jersey pension system, $39,967 has gone to the Democrats.

$15,767 of that sum is 2009 contributions to then-New Jersey Gov. Jon Corzine (D). Another $23,200 of that comes from two donations to the New Jersey Democratic State Committee. One of those party contributions was a $13,200 donation from Terrence O’Toole, whose employer is listed as Goldman Sachs. Another was a $10,000 donation from Blackstone CFO Laurence Tosi.

A Blackstone spokesman said that Tosi’s “contribution was to the federal account of a state party committee,” which the Blackstone spokesman insisted “is permitted by both the NJ and SEC rules.”

Meanwhile, the Democratic Governors Association has received $320,000 from employees of firms doing business with the New Jersey pension system. Another $80,000 has come to the DGA from the political action committee of JP Morgan, which also manages New Jersey pension money.

Even though the Democrats do not control the New Jersey Division of Investment, which makes the pension investment decisions, state pay-to-play rules apply to all state officials and political organizations, regardless of party.

All a big mistake?

During Pando’s investigation of the relationship between financial firms and public pension funds, some financial executives have insisted that campaign finance disclosure forms have inaccurately listed their employer. Charlie Baker, for example, previously argued that 33 separate campaign documents erroneously listed him as an employee of General Catalyst.

Similarly in response to this latest edition of Pando’s investigative series, the head of Christie’s State Investment Council, Robert Grady, said that the RNC was wrong to list his employer as Carlyle Venture Partners. The Carlyle Group also told Pando that the RNC was wrong to list the firm as Frank Carlucci’s employer. Meanwhile, a Blackstone spokesperson said Anthony Grillo’s employer was wrongly listed as Blackstone on New Jersey campaign documents. Despite these denials, the spreadsheet below lists employment information as it is recorded in public documents. 

Christie’s response (or lack thereof)

In light of this new data, and our earlier revelations, we asked Christie’s spokesman whether the governor is confident that New Jersey’s pay-to-play laws are working — and if not whether he plans to take steps to either create new laws, or ensure the existing ones are enforced. We asked the same question of the New Jersey Division of Treasury.

A spokesperson for the Division of Treasury said he was unable to comment until after we had published our data. Governor Christie’s office, which we contacted ~12 hours before publication, and which previously described Pando’s reporting as “biased, erroneous and riddled with errors,” had not commented by press time.

UPDATE: In response to Pando’s investigation, Goldman Sachs Vice President Andrew Williams emailed us with a statement that’s big news unto itself. The statement appears to have the firm take full responsibility for the controversial campaign contributions to New Jersey politicians. Williams said: “We don’t comment on individual donors, however I want to point you to our Goldman Sachs Statement on Policy Engagement and Political Participation which states”:

“In accordance with our internal policies, Goldman Sachs employees in the United States are required to submit for review all proposed political contributions to determine if they are consistent with our policies. Staff in the Office of Government Affairs (“OGA”), Compliance and Legal departments is responsible for the review and approval process.”

Former SEC chairman Arthur Levitt previously suggested to Pando that this is the norm. In an interview about the controversy surrounding Massachusetts gubernatorial candidate Charles Baker, Levitt told us that contributions from financial firms are not often made haphazardly – they are typically approved by the firm in question, as Goldman Sachs confirms. That potentially means any prospective legal culpability for such contributions could involve not just the individual donors, but also the firms.

Nj Pension Donors / Associated Companies

[Illustration by Brad Jonas for Pando]