Chris Christie's $300m Pension Proposal Broke State Anti-Corruption Laws
A PandoDaily investigation has discovered evidence that Gov. Chris Christie's pending deal to award a $300 million pension management contract to a controversial hedge fund is in violation of state anti-corruption laws.
New Jersey state pay-to-play statutes prohibit state contractors from directly or indirectly financially supporting the election campaigns of state officials. Those statutes also explicitly prohibit the use of outside groups or family members to circumvent that ban.
Additionally, separate Department of Treasury rules appear to prohibit public pension contracts from being awarded to investment firms whose employees have made significant financial contributions to political entities organized to operate in New Jersey state elections. Those laws also bar investment firms doing business with the state from making contributions "for the purpose of influencing any election for State office."
Yet, late last month, the New Jersey State Investment Council moved to award a controversial $300 million investment contract to Chatham Asset Management, despite the fact that Chatham's principal, and a woman living at his address and sharing his surname, donated more than $50,000 to a Republican election group that oversaw major portions of Gov. Christie's 2013 re-election operation. The proposed investment is already highly controversial given the hedge fund also reportedly owns a stake in the Atlantic City casino, Revel.
Craig Holman of the watchdog group Public Citizen, which originally lobbied for the pay-to-play statute, said that the $300m offer "appears to be not an indirect violation, but a direct violation of the law."
New Jersey lawmakers seem to agree. "The optics are clearly horrible and the intent of the law is that this not happen," said New Jersey Assemblyman John Wisniewski, the co-leader of the New Jersey Legislative Select Committee on Investigation. "There is a violation of the pay to play laws where someone donates funds to the RNC that are later used in New Jersey, and then that person receives a contract - in this case, a management of a large amount of money in return."
A spokesperson for Chatham Management appeared determined to distance the firm from the proposed (and already widely reported) deal, telling Pando: "Chatham Asset Management is not currently, nor has previously, managed funds for the State of New Jersey."
Incredibly, they then threatened to sue me, and Pando, if we reported that they had agreed to accept the proposed deal, saying: "Please be advised that if you choose to run a factually incorrect story, we reserve all legal rights we may have against you and your employer."
Following the campaign money from the RNC into New Jersey
According to an RNC press release from November 2013, celebrating Christie's re-election victory: "The RNC worked alongside the Christie campaign" on grassroots organizing efforts in his most recent campaign.
The press release was confirmed by press reports: The Newark Star-Ledger ran a story headlined "Republican National Committee spends big to persuade Jersey minorities to vote GOP," reporting that the RNC's operation in New Jersey spent at least $500,000 in the state - and ultimately up to $1.5 million. The money was part of the group's high-profile initiative to organize voters in support of the governor bid for re-election.
One of the major financial backers of the RNC in the lead up to that initiative was Chatham Asset Management. According to Federal Election Commission documents (embedded below), the firm's principal, Anthony Melchiorre, donated $22,500 to the RNC on May 5, 2012 and then $8,300 to the RNC on August 15, 2012. Andrea Melchiorre also donated $17,500 to the RNC on the same day, and then donated another $10,000 to the group on October 8, 2012.
Weeks after Christie was re-elected - and less than 18 months after Melchiorre's latest campaign donation to the RNC - the governor's state investment council announced its intention to invest $300 million with Melchiorre's firm, Chatham Asset Management. A memorandum written in November 2013 by the State of New Jersey outlines the state's intention to invest $300m of public money in a "Chatham Asset High Yield Separate Account." The minutes of a meeting of the New Jersey State Investment Council held around one week later show that the investment was discussed by the Council which found no impediments to the deal proceeding.
New Jersey laws bar campaign contributions from investment managers doing business with the state
The decision to award Chatham Asset Management the contract was made despite State Investment Council rules explicitly banning investment managers doing business with New Jersey from making (or having made) any political contributions "for the purpose of influencing any election for State office." Those rules bar pension contracts from going to investment managers who have made such contributions in any of the two years leading up to a proposed pension contract.
Additionally, section nine of New Jersey's pay-to-play law prohibits using outside groups - like, for instance, the RNC - or family members to circumvent pay-to-play statutes barring state contractors from donating to groups that financially support state election campaigns. That law declares that a contract is invalid if a contractor has contributed to a state candidate or party organization directly supporting the election of that candidate. The law says such a contract is invalid if a contractor "engage(s) in any exchange or contributions to circumvent the intent" of such a prohibition - by, for instance, routing campaign contributions through an outside group or a family member.
The law also stipulates that it applies to contributions "within the eighteen months immediately preceding the commencement of negotiations for the contract or agreement."
"If these contributions were made to the RNC in order to get around state laws, then it is a violation of the law," said Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics In Washington. "New Jersey law is clear: you cannot do indirectly what you are prohibited from doing directly."
A spokesperson for Governor Christie contacted by Pando two hours ahead of our original publication time said they needed more time to "verify and chase down" the facts surrounding Chatham's investment and the apparent violation of Treasury rules. Citing the fact that several New Jersey state offices were closed due to the Easter break, the spokesperson added "at this point we can't authenticate what David is alleging in his report." Robert Grady, head of the New Jersey pension investment council, did not respond to an email request for comment. The RNC did not respond to request for comment.
We agreed to give Christie's spokesperson an additional hour to confirm the facts - all of which are supported by publicly available documents linked above and embedded below. As of that revised publication time, Governor Christie has offered no additional comment. We will update this story immediately with any subsequent comment.
The Republican National Committee, the Christie administration and New Jersey Working Families have issued responses to our report.
RNC spokesperson Ryan Mahoney said only "These claims aren't accurate." He offered no factual refutation of Pando's reporting.
On behalf of Gov. Christie, New Jersey Treasury department Chris Santarelli told Pando:
The donations from Chatham Asset Management to the RNC which you have called into question are not in violation of the Department of Treasury rules regarding impermissible political contributions made by funds doing business with the State. It would be a violation of the regulation if the firm or an investment professional of the firm made a political contribution "to a Federal party committee or other political committee or organization for the purpose of influencing State or local elections governed by."
The purpose of the RNC is not to influence elections in the State of New Jersey and donations to the organization cannot be earmarked for a particular race.
The Christie administration's statement appears to directly contradict previous statements by the Republican National Committee. Only a few months ago, the RNC openly boasted about "work(ing) alongside the Christie campaign," and told New Jersey's largest paper about using hundreds of thousands of dollars to boost the Christie campaign's get-out-the-vote effort.
Santarelli also insisted that despite the size of the campaign contributions in question, the Christie administration's investment council "was not aware of the contributions you have called into question."
Analilia Mejia, Director of NJ Working Families, told Pando: "Details of self-dealing and corruption continue to pile up around Chris Christie. If this report is accurate, his reelection was tainted with dirty money. Our state's pension fund should not be for sale to the highest bidder. As a prosecutor, Chris Christie held public officials to a much higher standard than he seems to hold himself. If these allegations are true, Christie is not qualified to lead our state and we must again call for his resignation."
[David Sirota is a staff writer for PandoDaily, television commentator and nationally syndicated weekly newspaper columnist living in Denver, Colorado. He is the author of the books "Hostile Takeover," "The Uprising" and "Back to Our Future" and has written for The New York Times Magazine, Harper's, Wired, Vice, The Nation and Salon.com. He covers the intersection of politics, technology and popular culture.]