This week, Pando published the latest in a series of investigations into the connection between political donations and which firms are handed lucrative public pensions contracts. As a result of our reporting, there is now an investigation underway in New Jersey, with the possibility of more to follow.
Still, while most agree that corruption around billion dollar public pension contracts is a story that someone ought to be covering, some readers have wondered whether that someone has to be us.
As one reader put it, “What does this have to do with Silicon Valley?”
Or more specifically, as another asked: “Why is this on Pando?”
The flip response is to point to our tagline: “Speaking truth to the new power.” Wall Street’s power isn’t particularly new, of course. But the colossal power specifically of the alternative investment industry (hedge funds, private equity firms, etc) is a relatively recent development. It’s not that hedge funders and private equity moguls weren’t around before now, it’s that they are more politically powerful than they ever have been. To know that is true, remember that a private equity guy recently became a major party presidential nominee or recall that a hedge funder is now a huge political player. Alternatively, just re-read our reporting on billions of public pension dollars going to the alternative investment industry.
Yes, yes, but isn’t Pando primarily concerned with the new — which is to say, tech-driven – economy? How exactly are public pensions in any way related to that?
Certainly, the word “pension” comes with connotations of “old” not “new.” After all, a pension fund’s mission is to provide resources to people when they get older and retire. But that’s not the only way to think of the $3 trillion – yes, $3 trillion - worth of taxpayer money currently in America’s public pension funds. You can also think of it as a huge pool of investment capital – and a lot of that capital is now flooding into the technology sector.
You can see that most recently in the scandal engulfing Massachusetts gubernatorial candidate Charles Baker and New Jersey Gov. Chris Christie. In the center of that burgeoning political story is a major technology VC firm, General Catalyst, which got a significant investment from New Jersey’s pension fund. Today, according to its financial statements, New Jersey has $380 million invested in venture capital firms and more than $1.1 billion worth of Apple, Microsoft and Facebook stock.
Remember, those substantial sums represent the holdings of merely one of many public pension funds in the entire country. That point is critical, because it highlights just how significant public pensions are to the technology industry. Indeed, as we reported back in December, there is likely between $100 billion and $200 billion of public pension cash invested in the technology sector.
It’s frankly ludicrous to obsess about Facebook’s stock, or Apple’s or Microsoft’s, but not to care about the billions of dollars of taxpayer money invested in it.
Thus, in the same way the machinations of a tech VC firm or a billionaire tech investor are important to understanding the tech sector, so too is it critical to cover the news about these huge pools of capital known as public pensions. Likewise, while plenty of tech journalists are fascinated by super-cool health startup Oscar, none had previously reported that General Catalyst had invested in it using a fund containing New Jersey pension money, received shortly after a General Catalyst partner had donated ten thousand dollars to governor Chris Christie. Oh, and then Oscar and its parent company had handed that same partner equity in the company, and appointed him to their board.
Why should tech people care about public pensions? With scandals like that, how can you not?
Of course, public pensions’ connection to the new economy isn’t always as obvious as the General Catalyst story. And it’s certainly less obvious than, say, breaking news about a new app. Explaining and underscoring that connection will continue to present an interesting, but hopefully rewarding, reporting challenge for us.
Just because something is less obvious doesn’t mean it isn’t extremely relevant. In this case, it simply means its relevance is hidden in the mind-numbing reams of financial statements and actuarial reports that I’ve spent countless hours digging through these last few months.
For all the reasons above, my editors have given me their blessing, and the resources, to keep digging. We’ve already uncovered huge revelations and prompted government inquiries, but we’ve only just begun to explore the inner workings of this $3 trillion public pension system and its ties to the tech industry.
There is plenty more to report about this integral part of the new economy – and there is lots, lots more news to expose.
[Illustration by Brad Jonas for Pando]