Carolina Journal News Reports
[Editor’s note: See update at the end of this story.]
RALEIGH — Weeks after the state’s chief investment officer was fired from her $340,000 job, questions remain over potential conflicts involving charitable donations she solicited.
Patricia Gerrick, who was the deputy state treasurer before her termination, served on the board of directors and a fundraising committee for the State Employees Credit Union Family House in Chapel Hill. According to the Family House Web site and newsletters, at least 11 donations of $1,000 or more were given to Family House in Gerrick’s honor.
The state’s $60 billion pension fund either has investments in or does business with companies that are connected to at least half of those donors.
SECU Family House has scheduled a fundraiser at the Carolina Inn in Chapel Hill today at 6:30 p.m.
Unlike other states, the North Carolina Office of State Treasurer does not have a formal policy on charitable contributions solicited by employees.
Gerrick, who was recruited to the SECU Family House board after she was treated for leukemia, said she didn’t ask potential donors for money or suggest donors to the nonprofit.
“I specifically requested that any donations that would come in I would have no knowledge of in any form or fashion,” she said in a phone interview.
But Greg Kirkpatrick, the executive director of Family House, said Gerrick suggested potential donors and helped raise $75,000 to $100,000. He said she served on the Family House board from 2006 to 2008.
“She helped us raise a good amount of money in her role on the board by putting us in touch with some people,” Kirkpatrick said. “She provided me some names of people she thought would be helpful. That’s what you need in this business.”
Kirkpatrick said Gerrick brought potential donors to a fundraiser at the Carolina Inn in downtown Chapel Hill about two years ago.
“She had about 30 friends with her, and a larger group of 60 friends had been at her house the night before writing checks,” he said.
Gerrick said she did not suggest potential donors to Kirkpatrick.
“I did not give him [Kirkpatrick] names of people,” she said. “He may have met people by my participation. I didn’t give him a list of names to ask for donations. If he told you that he was mistaken. I knew where I was working. I knew that could cause problems.”
The revelations about donations on Gerrick’s behalf come amid a widening multistate probe into pension fraud corruption. The investigation, which started in New York, has led to charges in that state against the former state chief investment officer and others who are accused of taking kickbacks in return for pension fund business. More than 100 companies have been subpoenaed so far.
No public allegations of criminal wrongdoing have been made about the North Carolina Teachers’ and State Employees’ Retirement System.
The 40-room Family House opened in March 2008 following a $7.5 million capital and endowment campaign. It provides accommodations for people connected to patients at the nearby UNC Hospitals, such as bone marrow transplant recipients and their families. It also serves burn victims and people with eating disorders and other diseases. The suggested donation is $35 a night, but financial help is available.
Edwin Poston, a general partner at TrueBridge Capital Partners in Durham, said the company donated $2,000 to Family House after he and partner Mel Williams and their wives attended a fundraiser for Family House at Gerrick’s invitation.
“She invited us,” Poston said. “I didn’t know of the charity before Pat introduced us to it. This is something that’s near and dear to Pat’s heart, and we thought it would be nice to make a donation on her behalf.”
The state invested $50 million in TrueBridge’s CVE Kauffman I fund in 2007 and paid the company $537,857 in management fees last year.
Other donors to Family House in honor of Gerrick include:
• Michael and Stacie Arpey. Michael Arpey works for Credit Suisse. The pension fund has about $500 million invested with Credit Suisse and paid the company about $3.9 million in management fees last year. A subsidiary of the company, Credit Suisse Securities, has been a broker for the pension fund.
• Wendell McCain, one of the founders of Parish Capital Advisors of Chapel Hill, where the pension fund has invested about $497 million since 2004. The company received almost $3 million in management fees last year.
• Art and Karen Pappas. The state has invested $55 million in three funds run by Pappas Capital Advisors and paid almost $600,000 in management fees last year.
• Isaac and Pamela Green. He is the founder of Piedmont Investment Advisors of Durham. The state has more than $301 million invested with Piedmont and paid the firm $851,554 in management fees last year. Piedmont recently was hired by the U.S. Treasury to help manage investments in the Troubled Asset Relief Program.
• Nina LeSavoy. She currently works for Avec Capital in New York but previously worked for Cue Capital, which was an agent for a $100 million investment the state made last year in Avista Capital Partners Equity. North Carolina paid $767,123 in management fees to Avista last year.
Representatives of the other companies that do business with the pension fund declined to comment or did not return phone calls or e-mails.
Heather Franco, a spokeswoman for state Treasurer Janet Cowell, said the treasurer’s office abides by the State Government Ethics Act. A Chicago firm is reviewing the business and investment practices of the treasurer’s office.
In California, the State Teachers’ Retirement System prohibits anyone who does business with CalSTRS from making charitable contributions of more than $250 at the request of a board member, employee, or officer of the pension fund.
Franco said the state treasurer doesn’t have a formal policy on charitable contributions but is reviewing current policies, including limitations on charitable donations.
The model code of ethics for the National Association of State Retirement Administrators calls for pension fund administrators to review trust and conflict-of-interest laws to ensure that “relationships with other parties are not incompatible with the duties to the system.”
Officials at the State Ethics Commission did not return phone calls.
Former state Auditor Les Merritt said North Carolina's ethics law is murky and confusing but doesn't appear specifically to prohibit public officials from soliciting charitable contributions.
"There's always the potential of an appearance problem that they had the authority to demand contributions for future business," said Merritt, now the executive director of the Raleigh nonprofit Foundation for Ethics in Public Service.
In 2005, then-state Treasurer Richard Moore was criticized for asking money managers who did business with the treasurer’s office to contribute to a nonprofit foundation he started to help state residents better manage their finances. Moore said at the time that this wasn’t a conflict of interest.
In late August, officials from the treasurer’s office stated that Gerrick resigned and did not offer a reason for her departure. They maintained that story until Sept. 24, when documents from a public records request made by Carolina Journal and other media organizations revealed that she was terminated Sept. 4 when she refused to quit. Again, no reason for the termination was given. [Editor's note: See update at end of story.]
Gerrick also claimed she resigned when interviewed by CJ in mid-September, saying, “I serve at the pleasure of the sole fiduciary,” meaning Cowell.
Gerrick was diagnosed with leukemia shortly after she was hired as the state’s chief investment officer. She underwent a bone marrow transplant, sometimes working from her hospital bed.
“During my treatment there were people who were sleeping in their cars because they couldn’t afford hotels,” she said.
After her recovery, Dr. Thomas Shea, the director of bone marrow transplantation at UNC Hospitals, said he helped recruit her to the board of Family House.
Gerrick served on a fundraising committee for Family House but said her role on the committee was confined to trying to get some talent for a fundraiser.
“My role on that committee was to bring talent in,” Gerrick said. “My job on that committee was not to get donations. I was successful in obtaining some access to talent. I have not asked anyone to make a contribution to Family House. Not one person did I ask.”
Sarah Okeson is a contributor to Carolina Journal.
UPDATE: The treasurer's office released a memo dated Sept. 9 stating that Aug. 24, Gerrick had been given the option of resigning or being fired. Gerrick notified a department lawyer Sept. 4 that she would not resign. On Sept. 9, Cowell reinstated the original Aug. 24 separation letter, firing Gerrick.