State fires investment executive

Stock distributions were allowed to sit as market fell

Potential loss of $900,000

State is negotiating with public pensions over possible losses

March 24, 2001|By Julie Bell | Julie Bell,SUN STAFF

Maryland has fired a state investment fund administrator and is seeking to make whole public pensions that lost hundreds of thousands of dollars in potential profits as stock distributions were allowed to sit unsold for months while the stock market fell.

The potential loss to the state and pension funds may be as high as $900,000.

Daniel P. Healey's abrupt departure Wednesday as the state's director of investment group financing officially is being called a retirement by the state Department of Business and Economic Development.

But Harvey Kushner, chairman of the Maryland Venture Capital Trust, said yesterday that department Secretary David S. Iannucci told him Healey had been "relieved" of his duties.

Healey, 64, declined to comment and referred questions to state officials at DBED.

It is not clear how the department - where Healey was in charge of overseeing the administration of the Maryland Venture Capital Trust as well as the Enterprise Fund and a third state venture fund for start-up companies - misplaced notices of stock that had been distributed to the department.

According to the state's procedures, the notices should have prompted Healey or another employee in the office to call a broker to sell the stocks for the benefit of the state and public employee pension funds.

Iannucci said yesterday that, starting in July, a "procedural breakdown" led to the state's failure to act on four distributions from three companies.

The distribution notices were sent in July, September or October, November and December.

Iannucci declined to be specific about the nature of the breakdown but said:

"We're not trying to duck responsibility. We acknowledge a breakdown in this department, and for that we have regret."

The stock in the companies was sold Jan. 18.

The sales produced $1.4 million in profit for the state and pension funds invested in the trust, but would have realized up to $900,000 more if sold promptly, before the stock market worsened, Iannucci said.

He said the Department of Business and Economic Development was negotiating a settlement with the pension funds.

"We will be made whole," said Stephan G. Fugate, chairman of Baltimore's fire and police pension system.

The Maryland Venture Capital Trust was created in 1990 to encourage venture capital investments in companies in Maryland.

The state provided $2 million in seed money for the trust, while the Maryland State Retirement and Pension Systems contributed $15 million, the city employees' pension fund invested $840,000 and the city police and fire pension fund invested $1.26 million.

Selected 8 firms

The trust selected eight private venture capital firms to invest the money in companies.

Initially, the trust employed its own managing director. But after the managing director left the trust in 1994, the department of Business and Economic Development took over administration.

The venture capital firms would draw down the trust's money as needed to make investments in the companies they had selected.

Once the investments matured, the venture capital firms would sell their positions or distribute the stock resulting from the companies' public offerings.

Would get notice

As administrator, the state then either would get a check or stock distribution notices, allowing it to cash out of the companies and distribute the gains to the pension funds and the state.

The distributions were made in proportion to each fund's initial investment.

Martha Connolly, who recently left her position as the Department of Business and Economic Development's top biotechnology expert to join a Rockville biotechnology start-up, said the state had lost a knowledgeable investor with Healey's departure.

"The state has lost one of its finest technology champions," she said.

"He has one of the best horse senses for what's going to be a successful venture."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.