Job security was promised for testimony, ex-official says

But pension officer was fired after Chapman probe

July 13, 2004|By Stephanie Hanes | Stephanie Hanes,SUN STAFF

Carol Boykin was facing constant public criticism in her role as chief investment officer of the state employee pension system when U.S. Attorney Thomas M. DiBiagio made her a promise, she testified in federal court yesterday.

Despite the fact that she was taking blame for the pension system's poor financial performance and for allowing an alleged investment scandal to grow under her watch, DiBiagio told her that her job was protected as long as she was a witness against investment manager Nathan A. Chapman Jr.

It was an unusual deal, said lawyers who are not involved in the case. The federal prosecutor has no authority over a state job, and he should have known he couldn't keep the promise, they said.

As it turned out, DiBiagio didn't follow through, Boykin said.

DiBiagio's office declined to comment.

Boykin's testimony about DiBiagio might not have revealed much about whether Chapman, who is now standing trial in U.S. District Court, defrauded the state's pension system, as prosecutors claim.

But Boykin's statements under oath provide a behind-the-scenes look at the lengthy white-collar investigation that preceded this trial, now in its fourth week. It also sheds more light on how the $30 billion pension system operated in 2002 and 2003, one of the most turbulent times in its history.

By spring of last year, Boykin and the pension system had been repeatedly criticized for poor management. An independent study in 2001 ranked it last among peers in investment performance. Comptroller William Donald Schaefer criticized Boykin and others for not fully informing the pension system's board when one of its money managers -- Alan B. Bond -- was charged with fraud in 1999.

Bond, who prosecutors say helped Chapman boost his own companies at the expense of the pension system, was convicted of fraud in 2002 and is serving 12 1/2 years in federal prison.

Boykin and others were criticized for not recognizing what prosecutors say was Chapman's fraud.

The pension system's board of trustees voted in a closed meeting to fire Boykin in April last year. In an e-mail to prosecutors, she said she believed she was pushed out because her testimony to a federal grand jury in the Chapman investigation was "damaging to several board members."

"Tom [DiBiagio] told me that my job was protected for the duration of the U.S. Attorney's case on the Chapman matter," she wrote in an April 15, 2003, e-mail to Assistant U.S. Attorney Jefferson Gray, who is now prosecuting Chapman. She copied the message to DiBiagio. "I now need to know what my options and protections are as a witness for you."

Joseph M. Coale, a spokesman for the system, said yesterday that Boykin was not fired because of her testimony. "That is totally wrong and not factual in any way," he said. "She was fired, but not for that reason."

When prosecutors got back to her, Boykin testified, they told her they could not interfere.

"Is it fair to say that the U.S. attorney in this case did not fulfill his promise?" defense attorney Marc Rothenberg asked.

"Yes," Boykin said.

Prosecutors, who had not mentioned the promise in their direct questioning, said nothing about it after Rothenberg's cross-examination.

"It was a ridiculous promise to make," said George Parry, a former federal and state prosecutor in Pennsylvania.

But Boykin did not appear to be a hostile witness for the prosecution. She said that Chapman had not been forthcoming about business deals involving his companies and pension fund money, and said she believed he violated his fiduciary duties.

"I am fully supportive of the U.S. attorney's efforts in this matter," she said after court.

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