For Chris Christie, Scandals Die as Hard as Old Habits

By Louis Manzo, September 2, 2014

While some media outlets around the nation continue to shower Governor Chris Christie’s stealth presidential campaign tour with much fanfare, other serious media entities continue breaking news on the latest Chris Christie scandal that has begun to unravel. A scandal that involves the selection of Wall Street investment firms hired to manage the monies of the battered NJ public employees’ pension system.

Governor Christie has dusted off an old scheme that helped him fund his run for Governor while he was the once United States Attorney for the District of New Jersey, and he has even added a new twist to it. Christie then used his office as a chief prosecutor to twist the arms of prosecution targets for consenting to deferred prosecution agreements, whereby Christie got to pick a law firm to monitor the terms of the agreements. The agreements enabled the targets to escape prosecution. The law firms selected were chosen without a public bidding process and many were coincidentally substantial donors to Christie’s later run for Governor. The contracts for the law firms totaled hundreds of millions of dollars, including a $50M contract awarded to the law firm of his old boss, former U.S. Attorney General John Ashcroft.

As reported in Chapter Three of Ruthless Ambition: The Rise and Fall of Chris Christie, Christie’s seemingly corrupt conduct resulted in his being hauled off and chastised before a congressional committee where the practice of deferred prosecutions was ordered reformed. An unsavory episode that was vastly underreported, as many others, in Christie’s soiled public service career.

Old habits die hard, and in a strikingly similar pattern to how once United States Attorney Chris Christie doled out the no-bid deferred prosecution contracts to many law firms that funded his campaign for Governor, Christie has now orchestrated the doling out of hundreds of millions of dollars in investment management fees to Wall Street firms that were selected to invest and manage the pension funds of New Jersey public employees. Coincidentally, associates of the firms have been traced to campaign donations made to Christie’s campaign for Governor, the Republican Governor’s Association, which Christie now chairs, and the Republican National Committee.

In fact, an article written for the International Business Times by investigative reporter David Sirota claims, “The head [Robert Grady] of a New Jersey board that determines how the state invests its pension money was in direct contact with top political and campaign fundraising aides for Gov. Chris Christie as the governor last fall mounted a successful bid for a second term.” The same “Grady” admitted to attending campaign strategy sessions and, coincidentally, those “calendar items were sent between Sept. 12 and Oct. 24, 2013, in the late stages of a campaign that saw employees of firms with contracts to manage New Jersey pension funds contribute tens of thousands of dollars to the war chests of Republican groups supporting Christie’s re-election.” Grady, incidentally, even handed out work to his former firm, The Carlyle Group.

Former Securities and Exchange Commission Chairman Arthur Levitt termed the conduct “immoral.”

New Jersey ‘pay to play laws’ prohibit many direct contributions to NJ state politicians from the entities reported on in Sirota’s article. The news story alludes to a potential straw donor scheme, much like one that Christie’s Attorney General’s Office is now prosecuting against the former Birdsall Group, an engineering firm that had financially supported some key Democratic officeholder at odds with Christie.

“In the course of Christie’s five years as a gubernatorial candidate and sitting governor, employees and others affiliated with firms managing New Jersey pension money contributed more than $167,000 to his campaign and those of other New Jersey Republicans while giving more than $3.9 million to the Republican National Committee, according to state and federal campaign finance records. The national party spent heavily in New Jersey to support Christie’s candidacy.

“At the same time, campaign finance records show employees and political actions groups affiliated with firms managing New Jersey pension money have given more than $7.1 million to the Republican Governors Association, which spent hundreds of thousands of dollars in support of Christie’s re-election campaign. Christie now leads the RGA and has served on its executive executive committee since 2011,” Sirota reports.

Much of the pension fund money invested by some of the firms was placed in high risk hedge funds which have cost taxpayers, as well as the pension fund, billions of dollars. “Between fiscal year 2011 and 2014, the state’s pension trailed the median returns for similarly sized public pension systems throughout the country, according to data from the financial analysis firm, Wilshire Associates. That below-median performance has cost New Jersey taxpayers billions in unrealized gains and has left the pension system on shaky ground,” Sirota reports.

Ironically, “in all, New Jersey’s pension system has spent $939.8 million on financial fees between fiscal year 2010 and 2013. That’s only a little less than the amount Christie cut from state education funding in 2010 — a cut that played a major role in shrinking the state’s teaching force 4500 teachers. That money might also have reduced the amount the state needs to pay into the pension system to keep it solvent,” Sirota concludes.

Despite what the facts show, Christie, meanwhile, deflects the press and points the finger of blame the other way. Christie continues to steadfastly accuse the troubles with NJ’s employee pension system as the result of his predecessors and greedy public employees with overgenerous benefits. While gallivanting across the nation, campaigning for fellow Republicans, Christie states that his administration has tackled the problem by taking on the unions and working in a spirit of bipartisanship with NJ Democrats to clip public workers’ perks and smartly manage the pension fund.

The anatomy of the pension investment scandal depicts just what ‘pay to play laws’ were intended to safeguard investment dollars from: making a campaign donation and not the investment return become the evaluation criteria for hiring an investment firm. The chosen firms can now play fancy free with their recommendations, relying on their campaign donations as insurance against poor performance. One is left to wonder if the NJ pension dollars were being invested into risky hedge funds in order to temporarily prop them up while the investment firm’s other client investors got a chance to jump off a sinking hedge fund ship with an opportunity to even turn a profit while doing so.

Don’t expect any government agency to hold Christie accountable. He controls the State of NJ’s Attorney General Office and federal agencies rarely eat one of their own—Christie wears a Teflon suit courtesy of his stint as a United States Attorney. Ruthless Ambition documents and reports on how Federal prosecutors can break the law with immunity and explains why they can get away with doing so.

The only sure profits evident in this Chris Christie sordid scandal were the Wall Street firms’ return from their investments into Christie’s campaign coffers. The NJ public employees’ pension fund could only hope to be so lucky.