VIDEO: Magaziner Refuses to Release Contract with Oaktree, Firm Tied to Pay-to-Play Scheme

Wednesday, July 18, 2018


State Treasure Seth Magaziner continues to refuse to release the agreement between Rhode Island's Employee Retirement board and the private equity fund Oaktree Capital. Last Week, GoLocal unveiled that Oaktree will pay the United States Securities and Exchange Commission a $100,000 penalty tied to the pay-to-play scheme involving then-Treasurer and now-Governor Gina Raimondo.

Magaziner's office has refused to release the agreement for the $20 million state investment because "[it]may contain trade secrets and commercial or financial information that could cause material harm to the fund if released." The office has refused to release a redacted version.

Raimondo invested in Oaktree as General Treasurer — the fund earned hundreds of thousands in fees from the state’s retirement fund. And, Oaktree charged one of the highest fees - 1.75 according to a GoLocal review in 2015. A top Oaktree executive gave Raimondo an illegal $1,000 donation which her campaign accepted, but five weeks later returned. A second donation from another Oaktree executive Raimondo's campaign refuses to return and claims it does not constitute a federal violation because it is below the federal enforcement standard.

Oaktree has admitted no guilt to the charges as a part of the agreement with the U.S. Security and Exchange Commission, which has fined Oaktree - who paid a civil penalty.

According to the SEC, "Between September 2014 and April 2016, three covered associates of Respondent made campaign contributions to candidates for elected office in California and Rhode Island, which offices had influence over selecting investment advisers for public pension plans in those states. Within two years after these contributions, Respondent provided advisory services for compensation to the public pension plans. By providing those advisory services for compensation within two years after the contributions, Respondent violated Section 206(4) of the Advisers Act and Rule 206(4)-5 thereunder."

In addition, according to the SEC, “In October 2011, the Employees’ Retirement System of Rhode Island (“ERS”), through the Rhode Island Investment Commission, committed to invest, and subsequently invested, $20 million in Oaktree European Principal Fund III, L.P., a fund advised by Respondent.”

As a part of the agreement between the SEC and Oaktree, “As a result of the conduct described above, Respondent Oaktree Capital willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-5 thereunder, which makes it unlawful for any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under Section 203(b)(3) of the Advisers Act, or that is an exempt reporting adviser, to provide investment advisory services for compensation to a government entity within two years after a contribution to an official of the government entity is made by the investment adviser or any covered associate of the investment adviser.”


Related Slideshow: SEC Suit Against Oaktree Capital Management - July 2018


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