The New Jersey Department of Treasury cleared Massachusetts Gov. Charlie Baker of violating the state's pay-to-play guidelines regarding political contributions by investment management executives whose firms do business with the $76.8 billion New Jersey Pension Fund, Trenton.
The department also made several recommendations for changing the administration and monitoring of the pay-to-play policy.
As a private citizen, Mr. Baker made a $10,000 contribution to the New Jersey Republican State Committee in May 2011, noting on a political contribution form that he was a partner of General Catalyst Partners, a venture capital firm, said a Treasury Department audit report made public Thursday.
In December 2011, the state division of investment, which manages investments for the pension fund, made a $25 million commitment to General Catalyst Group VI. In January 2012, the commitment was reduced to $15 million. In September 2014, the division sold the investment “and no longer has any investments” with General Catalyst, the audit report said.
According to the audit report, the pay-to-play policy says the division of investment cannot do business with an investment management firm “if within two years prior to such engagement,” the firm or “investment management professional” in the firm made a contribution to a political party covered by the guidelines. The penalty is termination of the firm's contract.
The audit report said Mr. Baker was an “investment management professional.” However, it cleared him because he was associated with another General Catalyst fund — not the one for which the division of investment had made a commitment. His political donation “did not need to be reported and there was no violation” of the pay-to-play policy, the audit report said.
The results of the audit were announced Thursday toward the end of the meeting in Trenton of the State Investment Council by Christopher McDonough, director of the division of investment. The audit report was completed Nov. 20, two weeks after Mr. Baker was elected governor. The audit started in May 2014.
The council, which governs investment policies of the division of investment, is expected to discuss the audit report at its next scheduled meeting in March.
The report's recommendations include revising the pay-to-pay policy to remove ambiguity in the definitions of “investment management professional” and in the concept of a professional being “associated with” a firm. It also recommends having the division of investment take a more active role in checking political contributions made by firms and executives.
The division's “due diligence for compliance … relies on self-reporting” by the investment firms or individuals, the audit report said. Division staff members have begun searching a political contribution database as part of the division's compliance efforts, the report added.