State retirement board is assailed over choice of manager for funds Dixon says governor favored political backer

November 19, 1997|By C. Fraser Smith | C. Fraser Smith,SUN STAFF

Maryland's retirement board agreed yesterday to add $40 million to state funds managed by a Baltimore-based investment firm, ignoring the opposition of State Treasurer Richard N. Dixon, who charged that Gov. Parris N. Glendening was steering the business to a political backer.

The award went to Nathan Chapman Jr.'s Chapman Minority Equity Trust, which supervises a group of investment managers who specialize in start-up businesses run by minorities. Chapman already handles more than $100 million, a small fraction of the Maryland fund's $24 billion in holdings.

Dixon, who interrupted a Florida vacation to return to Maryland to make his protest, said Chapman "pushed hard with the governor's people" to land the business.

He contended that Glendening's allies on the 14-member board steered the award to Chapman to help the governor raise money for his re-election campaign.

"People around here know I'm an independent guy," Dixon said. "I'm not going to be a token for anyone or a puppet for anyone."

Chapman and his company have been campaign contributors and fund-raisers, contributing $1,000 to Glendening in 1994 and smaller sums to other state and local candidates. After the election, the governor named Chapman to the University System of Maryland's Board of Regents.

Judi Scioli, Glendening's press secretary, directed a reporter's request for comment from the governor to Frederick W. Puddester, Glendening's budget secretary and a member of the retirement board's investment committee.

"We followed the same procedure we followed before Dixon became treasurer," Puddester said.

"It has worked very well. Any suggestion that it's at all tied to campaign fund raising is ridiculous, preposterous."

Puddester said the board entertained proposals from two other minority investment firms but chose to stay with the Chapman firm, with which he said the board is satisfied. Each of the two applicants was invited to do business with Chapman, and at least one of them has done so, he said.

Nathan Chapman did not return a phone call yesterday. A secretary in his office said he was traveling.

Dixon also objected to the company's overall performance, asserting that other minority firms could do as well. "We're here to do our best for state workers and retirees," he said.

The treasurer said he also was troubled by a provision that will grant Chapman as much as $40 million more if the firm can broaden its client base and attract $40 million more in business from other customers.

Arthur N. Caple Jr., chairman of the investment committee, rejected the treasurer's contentions. He said Chapman has earned an average annual return of 18.5 percent on the state's money over the past five years, about 1 percentage point more than the return achieved on similar investments made from the $24 billion fund.

Caple said the board decided in 1990 to put some investments in minority hands and that the wisdom of that decision has been proved in the marketplace.

He said that as an incentive for Chapman to expand his client base, the committee made an additional $40 million award to him contingent on his finding other clients.

Neither Dixon nor Comptroller Louis L. Goldstein attended a meeting of the board's investment committee Friday when the additional $40 million was initially approved. Dixon was in Florida, and Goldstein said he tried to have the meeting postponed but was unable to do so.

Pub Date: 11/19/97

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