Senator Joseph Pennacchio made the following statement after learning that the Senate Budget and Appropriations Committee has invited the chairman of the State Investment Council and the head of the Division of Investment to testify Monday about New Jersey’s pension investment policies.
“I commend Budget Committee Chair Barbara Buono for heeding my call for pension hearings. News reports indicate the governor may reduce payments into our underfunded pension system yet again to balance the budget. It’s vital that we hear estimates of the long-term harm such a risky move will cause to taxpayers and public employees. Monday’s hearing will provide that opportunity.
“I also urge the budget chairman to forcefully demand answers from pension officials about the foolhardy June investment in Lehman Brothers. Written requests to the investment council chairman, the state treasurer and Governor Corzine asking for openness and transparency about the Lehman investment have been ignored. No one has provided assurances that the two Lehman executives and the one former Lehman executive on the Investment Council played no role in a decision that lost the state more than $115 million in less than four months.
“I urge the members of the Budget and Appropriations Committee to get answers to the following questions while the pension officials are before the public on Monday:
Did the current and former Lehman employees on the Investment Council own Lehman stock at the time they were reviewing the decision to invest in the now-bankrupt investment bank?
Did these Lehman executives play any role in the decision to put money into Lehman at a time when big banks and Wall Street investors were scared to invest in an obviously teetering company?
Did Lehman Brothers provide false information about the bank’s prospects?
If so, who provided this false information and why didn’t the Division of Investment do more to verify Lehman’s claims?
Why hasn’t New Jersey followed the lead of other Lehman investors such as San Mateo County, California, and sued Lehman?
Was any political pressure applied to help Lehman win approval of this investment?
Have the Division of Investment or the Investment Council done anything to prevent mistakes such as the Lehman investment in the future?
“Huge market losses have left our pension system far weaker than it was this summer, when underfunding was estimated at an incredible $29 billion. It’s possible the underfunding now exceeds the state’s entire annual budget of $34 billion. Taxpayers and public employees need assurance that the pension officials are doing everything they can to ensure that our system is sound. Their presence before legislators is long overdue, as are answers about a Lehman investment that retirees, workers and taxpayers have every right to question.”
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November 26, 2008
