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March 26, 2018
Pennacchio & Corrado Bill to Combat Corruption Passes Senate

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Bill Aims to Stop Corruption on NJ State Investment Council In Wake of Pension Scandals

Legislation sponsored by Senate Republicans Joe Pennacchio and Kristin Corrado to combat corruption on the State Investment Council, by forbidding members from voting on investments that present a financial or familial conflict of interest, has passed the New Jersey Senate.

Sens. Joe Pennacchio and Kristin Corrado’s bill would combat corruption on the State Investment Council, by forbidding members from voting on investments that present a financial or familial conflict of interest. The bill was introduced in response to scandals involving the council and the state pension system. (Pixabay)

“State Investment Council members should serve the people of New Jersey, not themselves,” Senator Pennacchio (R-26) said. “We cannot turn a blind eye to the despicable violations of public trust that have occurred in recent years. People who handle taxpayer dollars must be held accountable.”

The Senators’ bill, S-396, was introduced in light of reports that in 2008, the State Investment Council invested in Lehman Brothers right before the firm went bankrupt. The Lehman Brothers managers who sat on the council did not recuse themselves prior to voting to approve the investment in their firm. The misguided vote cost the pension system nearly $116 million.

Additionally, in 2014, concerns arose that Robert Grady, the former chairman of the council, had  invested public money into a fund which his own private firm also invested in. Such potential conflicts of interest would not be tolerated under the Pennacchio/Corrado legislation.

The State Investment Council was created by the New Jersey Legislature in 1950 to develop policies governing the investment of funds by the Director of the Division of Investment.

S-396, would require members of the State Investment Council to recuse themselves from a vote if the matter before the council involves one of the following conflicts of interest:

  • The member or their spouse is or was employed by the entity in which the investment is being made.
  • The member or their spouse has a direct investment exceeding $5,000 in the entity in which the investment is being made.

Under S-396, a member who breaks this law would be removed from the council, and must be immediately reported to the Governor and the Legislature.

“Any member who casts a vote despite an obvious conflict of interest does not deserve to sit on the State Investment Council,” Senator Corrado (R-40) said. “The hardworking families we represent must be able to trust that the state is investing and spending these funds wisely. This legislation will ensure council members who use public money for personal or political gain are punished accordingly.”

Related Facebook Post:
https://www.facebook.com/sencorrado/posts/739717089566983

Related Tweet:
https://twitter.com/joepennacchio/status/978349887610814465

Website Post:
https://www.senatenj.com/index.php/pennacchio/pennacchio-corrado-bill-to-combat-corruption-passes-senate/37623