Several overseers of Arkansas state pension funds with billions in assets are calling for an investigation into whether Bill Clinton used the money to win friends and donations from Wall Street firms. Bill Mattox, assistant director of accounting and auditing for the Pulaski County Special School district, says fees paid to Wall Street companies for advice by the Arkansas Public Employees Retirement fund and the Arkansas Teachers Retirement System began rising sharply in the late 1980s.
That's around the time then-Arkansas Gov. Bill Clinton began to seriously think about running for the Presidency.
Mattox said the fees, which in some cases rose over 1,500 percent in just a few years, jumped by a much greater proportion than the assets being managed. 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 known for close business relationships between its own companies and government. Mattox and other pension watchdogs have taken their suspicions to the office of Whitewater special prosecutor Kenneth Starr.
Starr has turned them away, saying abuse of pension funds would be interesting and criminal but is not part of his jurisdiction. 'It seems to me that the pension funds are being run for the benefit of the political machines," Mattox says. Mattox says he has given supporting documents 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," Mattox says. "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 quickly 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 wondering how much of Wall Street's attraction to Bill Clinton was love and how much 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 helped 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, a recently-elected director of the Arkansas Teachers Retirement System.
The numbers seem 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 when Bill Clinton was running for president. In that year, the retirement system's fund paid an extra $2.3 million in fees. The assets in the retirement funds went from $3.06 billion to just under $5.4 billion in all the years 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 retirement 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. The fees do not include commissions on trades, which are built into the gain or loss on the transaction. Mattox and the others say there seems to be an unusual increase in trading activity. He has suggested that regulators determine whether "churning" unnecessary trading took place just to generate commissions.
The retirement people are trying to correlate a list of Wall Street firms 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. But it seems like a good start.
(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).