Assembly to look at pension system

Lawmakers planning hearing about oversight to be held after Nov. 5

October 02, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

The General Assembly will hold a hearing after the November election on the state employee pension system and its oversight of money manager Nathan A. Chapman Jr., a senior senator said yesterday.

Sen. Edward J. Kasemeyer, co-chairman of the Joint Committee on Pensions, said lawmakers need to know more about questionable transactions disclosed by The Sun involving Chapman and an investment firm he supervised.

"I want to know for myself what happened and how it happened," said Kasemeyer, a Howard County Democrat. "I think we ought to be beyond reproach when you're dealing with this retirement system."

He said the hearing could be held as early as mid-November.

Pressure for official action has increased after reports about Chapman's management of hundreds of millions of dollars for the pension system, which provides retirement benefits for state employees and public school teachers.

The Sun reported yesterday that Alan B. Bond, a "sub-manager" reporting to Chapman, for more than a year engaged in a pattern of apparently excessive trading that could have been intended largely to generate commissions at the pension system's expense.

The paper previously reported that Bond, while under Chapman's supervision, used pension system money to buy $5 million in stock in a company controlled by Chapman. A month later, Chapman awarded Bond another $10 million in pension system money to invest -- a deal potentially worth $45,000 a year to Bond's firm.

Chapman informed the pension system of Bond's investments in his company in quarterly reports that top officials say were not scrutinized by staff.

Bond is in jail after being convicted on federal fraud charges in New York in June. Chapman was fired by the Maryland pension board in January after trustees learned the U.S. Securities and Exchange Commission was investigating his dealings with Bond and another manager who invested in eChapman.com.

The U.S. attorney in Baltimore and state securities regulators also are investigating.

News reports about Chapman prompted Del. Robert L. Flanagan, a Howard County Republican, to write a letter to Maryland Attorney General J. Joseph Curran Jr. yesterday urging him to bring a lawsuit to recover millions of dollars lost as a result of trading by Chapman's managers.

Flanagan said the fact no suit has been filed creates an impression that "Maryland political insiders" are above the law. Chapman is a friend of Gov. Parris N. Glendening and chairman of the state university system's Board of Regents.

Deputy Attorney General Donna Hill Staton said yesterday that the office is working with the pension system to sift through "a very complex set of facts" and determine a course of action. "If that involves a recommendation on filing a suit, then that is what will be done," she said.

Kasemeyer said he received a letter from Del. C. Richard D'Amato, an Anne Arundel Democrat, calling for a hearing and agreed it was a good idea.

The hearing will focus on how the pension board and the staff of the $27 billion state retirement system operated, Kasemeyer said.

Among the questions he wants answered, he said, is why staff members did not raise an alarm after they received records last October detailing Bond's purchases of Chapman company stock.

Pension system trustees also took a step yesterday toward examining the staff's performance.

The pension board's executive committee directed that a contract proposal be prepared for hiring a consultant to evaluate the system's management and the trustees' operations. The committee asked the staff to present the document at a full board meeting in two weeks.

Comptroller William Donald Schaefer, who is chairman of the board, said he was disturbed that the staff had overlooked reports from Chapman that disclosed his sub-managers' holdings in Chapman's companies.

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