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State Investment Board Questioned

November 11th, 2009 by Mike Vasilinda

Federal regulators are raising questions over what the state promised local governments who used the state to invest taxpayers money. The Securities and Exchange Commission has been looking at state practices for more than a year. And as Mike Vasilinda tells us, at least one state official says more investment advice is needed.

This sprawling New York City apartment complex and this county courthouse have one thing in common. Both point to failures by the State Board of Administration. The state pension fund invested 250 million in the complex in 2006, but now values the investment at zero.

Also in 2007 the state pool that helped local governments invest tax revenues got caught in shaky investments. The Federal government has been investigating for more than year.

The two incidents have Chief Financial Officer Alex Sink calling for more oversight.

It should be more than just three elected officials who have no qualifications,” Sink said. “So I have a proposal to expand the board to include people who have financial and investment experience.

What Securities investigators want to know is if local governments were told their investments were safe, within days of being frozen.

So far, local governments have gotten back 75 cents on the dollar. The new investment manager says it will be some time before everything is returned.

Looking at the maturities of those securities, our conservative view is that in a period of five to seven years, we should be able to pay back most of the remainder,” State Board of Administration Executive Director Ash Williams said.

The federal government isnt answering questions about its investigation.

The Governor and Attorney General, who share Pension fund oversight with the CFO, have tabled a plan to expand members of their board until the December meeting.

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