The New Hampshire Retirement System decides how and when to invest some 4-point-4 billion dollars for the benefit of retired state workers. To date, the fund has had a good track record. But now, the chairman of the board that oversees the retirement system has come under scrutiny for alleged conflict of interest. And, as NHPR's Josh Rogers has learned, the chairman is also alleged to have used his position to solicit donations from companies doing business with the state.
Click here to see the fund raising letter sent to a vendor.
The offices of the state's retirement system at a Concord office park are hardly impressive. But inside this bland 2-story building, decisions are made that affect the livelihood of about 51-thousand current and retired state workers.
This past winter, the system trustees tentatively approved a 10 million stake in a high-tech start-up called Hermes Technology. The company existed only on paper but it planned to market a radar system that would reveal flaws in roads and bridges without the need to dig a single hole in pavement or concrete. After a power point presentation by the chief technical officer for Hermes, the thirteen trustees were impressed. So impressed that the chairman, Edward Theobald, said he was prepared to invest his own money in the company.
The prospect of that investment drew Theobald into a controversy that led to charges of conflict of interest, and the likely end to Theobald's stint on the board. Kim France, spokesperson with the retirement system, reads the results of board's last meeting.
"The NH retirement system board of trustees, upon the recommendation of it's audit committee, made a finding that board Chairman Edward J. Theobald had fialed to disclose a conflict of interest in violation of the code of ethics for the retirement system."
For his part, Theobald said in a letter to the retirement system's audit committee that he has never engaged in any activity that would compromise the integrity of the system or the board. In the end, the board backed away from the Hermes deal and he supported that move. He acknowledged that at one time, he did express an interest in Hermes but that he ultimately decided against it. First, because a lawyer for the retirement system warned that it would be a conflict of interest. And second, because in February, he came to feel that the company wasn't a good place to put his or the retirement system's money.
But one document from the company dated as late as mid-March showed Theobald holding a 2% stake in Hermes. Theobald's lawyer, Dick Molan, says there are several versions of that letter and the one that matters most is the one that shows Theobald had no ownership stake. It is unclear which version was sent to the retirement system trustees.
Molan says some of the documents handed to NHPR by the retirement system were NOT made available to him. He sees that as proof that someone is looking for a way to bring down his client.
"I'm telling you, I don't know what these guys are up to, but we are going to get to bottom of this -- because I've never seen such blatant, blatant disregard for the laws in this state in trying to go after somebody. I've been around for 35 years; I've just never seen anything like this."
But for the retirement system's trustees, the issue was not simply whether Theobald was an investor but whether he disclosed that he might have become one. There is no question that Hermes offered him an ownership stake and a position on its board. State Treasurer, Mike Ablowich, heads the retirement system's audit committee and says Theobald had an obligation to tell everyone right away.
"Had the other members of the board known about this offer, we probably wouldn't have spend anymore time talking about this particular investment. We probably would have cut off any negotiations and any discussion about it and terminated our potential involvement at an earlier date than we actually did."
The board has another bone to pick with Theobald. They took exception to his use of official stationary to solicit large contributions to a charity he supports. At least one company that relies on the retirement system for work was given the choice to donate either 25-hundred or 5-thousand dollars to the fallen firefighters family fund. The company wrote a check for 25-hundred.
The board is asking all of its vendors if they've received similar requests in the past three years. One trustee said this issue was the next big thing coming up for Theobald.
Molan, Theobald's lawyer, also represents the professional firefighters of New Hampshire. He dismisses the idea that Theobald did anything wrong.
"Over the years I've received numerous requests from governors and department heads that are involved in other charitable things -- soliciting contributions for them. Or soliciting tickets for dinners at which they were going to be honored. I don't see anything wrong with it."
Governor Lynch says he is looking for a replacement for Theobald, someone who enjoys the confidence of the retirement system board and the investment community.
The retirement fund trustees are scheduled to meet on Tuesday. Their meeting in their very unassuming building is expected to be anything but ordinary.
For NHPR News, I'm Josh Rogers.
