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New SEC Complaint over Pay-To-Play And NC Pension

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Courtesy of the North Carolina Department of State Treasurer

A new complaint alleging a pay-to-play scheme involving North Carolina’s pension has been filed with the SEC. It involves one of North Carolina’s most prominent Democratic families and a program that invests in state businesses.

The State Employees Association of North Carolina filed the complaint with the SEC’s Office of the Whistleblower on Tuesday. The heart of their complaint, a 2011 campaign fundraiser at the Charlotte home of Erskine and Crandall Bowles.

Guest of honor and campaign cash recipient State Treasurer Janet Cowell has the final say on how North Carolina’s pension money is invested.

Besides serving as head of the UNC System and Chief of Staff to President Clinton, Erskine Bowles is the founder of Carousel Capital, an investment firm headquartered in Charlotte. His eldest son Sam is a vice president at the firm. "And a few weeks after that fundraiser," says Ardis Watkins of the State Employees Association, "the firm where Erskine Bowles has been listed as a senior advisor since 2002, received a contract from the state for this North Carolina Innovation fund."

The $230 million North Carolina Innovation fund is the program that invests in state businesses. Carousel Capital was granted a portion of that fund though the treasurer’s records don’t indicate how much. Nor do we know how much the firm is paid to manage the fund.

This is the second time this year the State Employees Association has filed a complaint with the SEC over Treasurer Cowell’s management of the pension system.  

The Treasurer’s office spokesman says these accusations are an old story and without merit. He also provided an email chain where the Treasurer’s Assistant General Counsel and Carousel Capital’s compliance officer – in consultation with outside attorneys – both found the fundraiser complied with an SEC rule that sets strict limits on campaign donations from investment advisors. Finance records do not show how much the event raised, since contributions aren’t necessarily given to the candidate on the spot.

There are no records showing Erskine and Sam Bowles contributed directly to Treasurer Cowell at the event, but Crandall Bowles did and that’s another point in the complaint. Crandall Bowles is on the corporate board of JP Morgan, which manages some real estate investments for North Carolina’s Pension. The SEC rule may bar her from contributing more than $350 to Cowell’s campaign. Records show she paid $774 to the event caterer in what’s known as an "in-kind contribution."

The treasurer’s office statement says that if Carousel failed to comply with the SEC rule, the investment would likely end.

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