State Treasurer Janet Cowell has appointed six people, including a former CEO of Wachovia, to an expanded Investment Advisory Committee to help her decide how to invest the state’s pension funds.

The appointments replace a five-member board that served under former Treasurer Richard Moore. All are newcomers.

“North Carolina is fortunate to have John Medlin and this expert group working to protect our pension fund,” Cowell said in a statement. “The collective experience and integrity that this committee represents will be invaluable in maintaining the long term stability of the fund for North Carolina’s public servants.”

The other appointments to the committee are Steve Jones, the former dean of UNC Kenan-Flagler Business School; Harold Martin, chancellor of NC A&T State University; Donald Tarkenton, manager for Raymond James Financial Services; Neal Triplett, president of Duke Management Company; and Courtney Tuttle, managing director of investment banking at Jefferies & Company.

The committee is advisory and doesn’t have any decision-making power. Cowell serves as its chairperson.

“I think adding more people will help,” said Ed Regan, the executive director of the North Carolina Retired Governmental Employees’ Association. “Looking at the background of the people it looks like they would be good advisors.”

But Chris Tobe, a trustee for Kentucky Retirement Systems and a senior consultant for Breidenbach Capital Consulting, LLC, said he would consider only Triplett to be highly qualified because he is the only chartered financial analyst on the panel.

“They are not investment management people,” Tobe said of the other committee members. “They come from finance, investment banking, and general business backgrounds. They are smart people. There are several hundred CFA charter holders in the State of North Carolina who I think would be more qualified with specific investment management backgrounds.”

Medlin, who was CEO of Wachovia for 17 years, compared the committee’s relationship to the state treasurer to a belt and suspenders.

“We’ll try to be helpful to her,” Medlin said. “The state treasurer and employees are like a belt. Hopefully, they keep the pants up. We’re like the suspenders. The suspenders are there in case the pants start slipping down.”
Tarkenton said the committee won’t select investment managers but will look at how they are selected and monitored.

“She just wanted to have some fresh eyes,” Tarkenton said. “She wanted some people from several different career areas.”

The new committee was set up under a law signed by Gov. Bev Perdue last July. State Sen. Dale Folwell, R-Forsyth, was one of the sponsors of the original legislation setting up the committee. That bill did not pass but its language was rolled into another bill that became law.

“If the breadth and depth of the other members of the committee is equal to or greater than that of John Medlin, then it’s a plus for the participants,” Folwell said.

Two of the members, Tarkenton and Martin, are also on the board of the Teachers’ and State Employees’ Retirement System.

Two members, Medlin and Tuttle, donated money to Cowell’s campaign for treasurer. Medlin donated $850 to Cowell’s campaign in 2008 and 2009. Medlin said he had also contributed to another candidate for treasurer, Bill Daughtridge.

“I didn’t really seek the job and frankly didn’t really want the job,” said Medlin. “I didn’t make the contribution to get the job. I would almost make a contribution not to get the job.”

Tuttle, who donated $1,000 to Cowell’s campaign in 2007, did not return a phone call. Tuttle also graduated from Cowell’s alma mater, The Wharton School of Business at the University of Pennsylvania.

Edward Siedle, a former attorney with the U.S. Securities and Exchange Commission, said Cowell should have avoided appointing people to the advisory committee who had contributed to her campaign.

“I think that’s a big misstep,” said Siedle, who is now the president of Benchmark Financial Services in Ocean Ridge, Fla. “Why would you do that? There are tons of potential candidates. Get some who haven’t done that.”

The committee members do have to follow an ethics code that Cowell adopted in February includes bans on members selling property to the retirement systems or getting loans from it.

Siedle also questioned why the committee doesn’t have any authority and is only advisory.

“Having an advisory board generally indicates an acknowledgement that the staff or the trustee don’t have the education or the investment background that they need and that there’s a need for investment professionals who aren’t involved in the fund,” Siedle said.
The last meeting of the committee was in May 2009.

Ed Macheski, a retired New York money manager and Alamance County resident who has been critical of the pension system, questioned why the committee has met so infrequently. Its next meeting is scheduled for April 7.

“I don’t think it meets the fiduciary standards that are required,” Macheski said. “That’s months without a meeting in a very serious time in the investment world. Who’s running the show?”

Heather Franco, a spokeswoman for Cowell, said it took time to fill the seats on the committee.

“During this period, the department elected to postpone the meetings to ensure that public members are present,” Franco said.

Cowell is the sole fiduciary for the pension fund, meaning she makes the final decisions on investments. Many states use investment boards.

“Sole trusteeships can be problematic,” said Robert Borden, the chief executive officer for the South Carolina Retirement System’s Investment Commission. “When you have the right person in the job, it can be wonderful. But if you have the wrong person, it can be problematic.”

South Carolina’s investments are overseen by a six-person commission with members serving staggered, six-year terms.

Borden said Cowell and some of her staff visited him shortly after taking office. “It seems to me that North Carolina is being pretty well served by this new treasurer,” Borden said. “I was pretty impressed by the type of questions and the depth and breadth that she and her team were asking.”

Sarah Okeson is a contributor to Carolina Journal.