Governor Phil Murphy has signed legislation sponsored by Senate Republicans Joe Pennacchio and Kristin Corrado to combat corruption on the New Jersey State Investment Council.
Gov. Phil Murphy has signed Sens. Joe Pennacchio and Kristin Corrado’s bill to combat corruption on the State Investment Council. S-396 was introduced in response to scandals involving the council and the state pension system. (Wikimedia Commons)
The legislation (S-396) forbids members of the council from voting on investments that present a financial or familial conflict of interest. The bill was pushed forward by the senators in the wake of several pension scandals in New Jersey.
“This legislation is a critical step forward in our longstanding efforts to bring transparency and accountability to the way the government invests taxpayer dollars,” Senator Pennacchio (R-26) said. “I am glad to see Governor Murphy take action on our bill. There have been far too many violations of public trust on the State Investment Council in recent years. Anyone who handles public money must be held accountable.”
S-396 was signed into law by Governor Murphy on July 3, 2018. The bill was first 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 will 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, will 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.
“Every public employee in our pension system and every taxpayer in New Jersey should be able to trust that the state is investing and spending their money wisely,” Senator Corrado (R-40) said. “Any member who ignores that responsibility, and chooses to cast a vote despite an obvious conflict of interest, does not deserve a seat on the investment council. I am glad to see the administration join us in our advocacy by signing this bill into law.”
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