Treasurer Candidate Denies $5 Million Deal a Conflict of Interest
Tuesday, July 06, 2010
Gina Raimondo is the one-third owner in a venture capital firm that has received a $5 million investment from the State of Rhode Island. The Chairman of the State Investment Commission is the General Treasurer and now she is running for that office.
Her candidacy raises a slew of questions: if elected what does this mean? How does the Investment Commission function? How does she sell her shares in her business if she is the General Treasurer elect and overseeing a direct $5 million investment?
There are a lot of questions that Gina Raimondo is facing in her run for General Treasurer and she doesn’t seem to have many answers.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTRaimondo is one of three partners in a venture capital firm known as Point Judith Capital Partners. She has refused to disaffiliate from her firm during her candidacy and she has rejected the idea of a blind trust during her candidacy.
Watchdogs Warn It Could Be a Conflict of Interest
One Washington-based government watchdog group told GoLocalProv that it could be a conflict of interest if Raimondo is elected as General Treasurer.
“There is a potential for a conflict of interest, but right now she’s not a government official,” said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington. “The bigger problem is if she were elected. What would she do then and what would she do with her business?”
Raimondo told GoLocalProv that she would ensure there was no conflict by resigning from her firm and severing any financial ties with it—if and after she is elected. Moreover, she said if the General Treasurer had to make any decisions about its $5 million investment with Point Judith Capital Partners, she wouldn’t be involved in them.
“Certainly if there is any decision involving Point Judith, I will recuse myself,” Raimondo said. “That’s a no-brainer.”
But one expert in law and ethics wondered if it would really be possible for Raimondo, as the General Treasurer, to recuse herself from any decisions about where to invest state money.
“If you’re the top person in that office aren’t you ultimately at some point going to have to give your approval?” said Ron Washburn, a professor of law and economics at Bryant University. “It’s difficult to remove yourself when you’re the person who is signing off at the end of the day.”
A closer look at how decisions about investments are made shows just how difficult it might be for Raimondo to completely remove herself from the process. As General Treasurer, one of her jobs would be overseeing the state pension fund. Those decisions are made by the State Investment Commission, an agency that exists as part of the General Treasurer’s office.
Raimondo would be the chair of that commission. So she could recuse herself from any votes about investing in Point Judith Capital Partners. But four of the remaining eight voting members would be appointed by her.
Raimondo told GoLocalProv she would seek an opinion from the State Ethics Commission to see what else she would need to do to avoid a conflict of interest.
She would also have to battle the public perception that there is a conflict, Washburn said.
He said the public might think that as General Treasurer she might be hand out favors to her former business partners. “Does that give the company a track for inside information?” Washburn said. “Would they have a chance of getting a better deal than another company?”
In an interview, Raimondo downplayed the significance of her deal with the state. She pointed out that the $5 million investment from the state is just a small part of the $100 million worth of investments her firm oversees—and an even smaller part of the $8 billion in the state pension fund. “This is much ado about nothing,” she said.
Her firm makes money by investing in over 20 start-up companies. The firm invests some of its own money as well as that of other individuals and organizations—such as the state pension fund. Raimondo said her firm will keep 20 percent of the profits from the $5 million in state money it is investing.
Raimondo Won’t Release Tax Returns
But she is not releasing her tax returns, which would show she exactly how much she makes and where it is coming from.
The fact that her firm is doing business with the state, however, makes it all the more important that she disclose her returns, said Vic Pichette, campaign manager for her Republican opponent, Kerry King. “It speaks volumes that she is not,” Pichette said.
Raimondo says she won’t release the returns because that would expose how much her partners earn. That’s because the three partners in her firm split profits equally, Raimondo told GoLocalProv. She said it was not an issue because the public can already find out how she makes her money, by viewing the investment portfolio on her firm’s Web site. The names of her two partners are also available on the site.
The $5 million investment from the state is being made in installments spread out over a few years. From 2007 to this June, the state had spent $2.85 million out of the total $5 million, according to Tim Gray, Director of Communications for the General Treasurer. The rest of the $5 million will be spent by the end of 2011, according to Raimondo.
But Raimondo disputed the claim that the public might have a problem with the work she has done for the state. In fact, she expects the opposite.
She said voters would see the value of having a candidate with experience in investing and a record of helping companies grow and create jobs. “I think it’s a good thing I have a 10-year record as an investment professional,” Raimondo said.
PUBLISHER’S NOTE: In the spirit of full disclosure, at the early inception of GoLocalProv.com, we met with representatives of Point Judith Capital in 2007/08 for a meeting to discuss the future of media and the opportunity for creating a new community digital news organization.
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