That's around the time that Arkansas governor Bill Clinton began to seriously think about running for the Presidency. Mattox said that these fees, which in some cases rose over 1,500 percent in just a few years, jumped by a much greater proportion than the assets that were under management. Plus, Mattox says, the advisement fees were spread out among a much larger number of companies. And, all of the investment advisers were from outside Arkansas. That's highly unusual for a state that is known for close business relationship between its companies and government.
Mattox and other pension watchdogs have taken their suspicions to the office of Independent Council Kenneth Starr. But Starr has turned them away for now, saying that abuse of pension funds - while it would be interesting and criminal - simply did not fall under the current jurisdiction of the special prosecutors responsibility to look into abuses at Madison Guaranty Trust.
'It seems to me that the pension funds are being run for the benefit of the political machines,' says Mattox. Mattox says he has already given documents to back up his accussations to Hickman Ewing, the chief assistant to Starr and the man running the Arkansas portion of the investigation.
'He was interested, but Hickman said he couldn't connect it to Whitewater so it would be outside his scope,' says Mattox. `He suggested someone in the press might be interested in it.`
For a Democrat, President Clinton has an unusually close relationship with Wall Street. In fact, the financial markets did not react in the typical gloomy fashion when Clinton upset incumbent George Bush in the 1992 election. And Clinton quicky surrounded himself with Wall Street people, naming Robert Rubin and Robert Altman to top positions in his Administration.
But a number of folks in Arkansas are now wondering just how much of Wall Street's attraction to Bill Clinton was love and how much of it was money.
'All of a sudden they were paying millions and millions in fees,' says Roy Drew, who has discussed the handling of pension funds with members of Starr's investigation. 'The way you get campaign contributions from all over the country is to let everyone share a piece of the pie.'
Drew, who has a background in finance and once help audit the Arkansas Development Finance Authority, says the special prosecutor's office seemed interested in how the pension funds were being used.
'I definitely think there was corruption,' adds Linda Hogue, recently-elected director of the Teachers Retirement System.
The numbers certainly are suspicious. In 1987, the Teachers Retirement System and the Arkansas Public Employees Retirement fund had only seven Wall Street firms as advisors. By 1993, that pension fund alone was up to 32 advisors. During that same period, fees paid by the fund for advice soared to $11.1 million from just $1.1 million. The biggest increase occurred in the 1991/92 fiscal year - which just happens to be when Bill Clinton was running for President. In that year, the retirement systems fund paid an extra $2.3 million in fees.
The assets in the retirement funds only went from $3.06 billion to just under $5.4 billion between 1987 and 1993. And the return on those assets was no better when the number of advisers increased, even though the stock and bond markets were experiencing one of its strongest periods ever during these years.
The retirment funds had a 12 percent gain in the 1987/88 fiscal year when they had just seven advisors. When all 32 advisors were on board in 1993/94, the gain was only eight percent.
And the fees do not include commissions on trades, which are built into the gain or loss on the transaction. Mattox and the others say that there seems to be an unusal increase in trading activity and he has suggested that regulators determine whether 'churning' - or unnecessary trading - too place just to generate commissions.
The retirement people are currently trying to correlate a list of those Wall Street firm that are receiving the fees from Arkansas retirement system and those who contributed heavily to the Clinton campaign in 1992. This won't be easy to do since contributions can be concealed in a number of different ways. The group has not yet looked into whether other state retirement funds, which also have billions in assets, had a similar growth in fees in the same years.
'I'd like to see anyone who has the capability of investigating the investments and money managers of the pension funds do so,' says Bill Ray Lewis, assistant superintendent of the Harrison School District. Bill Shirron, executive director of the Teachers Retirement System, says the number of his advisers has risen over the years because he wanted a diversity of opinion and because the amount of money under management has grown. But he does admit that eight of the current nine advisers are from outside Arkansas.
(John Crudele is a financial columnist with the New York Post. His mailing address is P.O. Box 610, Lincroft, N.J. 07738. Click here to send him e-mail).