Raimondo Never Disclosed Illegal Contribution from Oaktree to Employees Retirement Board or SEC

Friday, July 13, 2018


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Then-Treasurer Raimondo never reported the illegal donation, but did return it.

Now Governor and then-General Treasurer Gina Raimondo has been tied to an illegal pay-to-play scheme involving Oaktree Capital. According to a settlement between the United States Securities and Exchange Commission and Oaktree — a $100 billion California-based fund that Raimondo invested $20 million — the private equity firm gave Raimondo an illegal donation while she was running for Governor in 2014.

Oaktree is barred under federal law from making such donations and Raimondo ultimately returned the donation five weeks later. Raimondo, who has been proficient at fundraising from Wall Street interests, was not required by law to disclose the illegal contribution, but some say that she had an ethical obligation to disclose the donation.

“As an elected politician, Raimondo should have disclosed to the board the potential for direct and indirect dark money contributions to her campaign — and explained the dangers of both — and disclosed any potential violations of law,” said former SEC investigator Ted Siedle. On Thursday he received a $30 million whistleblower award by the Commodity Futures Trading Commission (CFTC) — the largest in the agencies history.

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."

“She should have disclosed it. I think all elected officials — in that position of managing a pension — should explain there is a danger of direct campaign contributions that would be harmful,” said Siedle who is also slated to receive another record Whistleblower reward from the SEC.

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"Pay-to-Play" asserted in RI by the U.S. SEC.

Raimondo’s campaign refused to answer questions about the lack of disclosure. Spokespeople for her campaign say there was no “legal requirement” to report the illegal donation but just to return the check. “Governor Raimondo takes campaign finance rules extremely seriously and her campaign did everything it was supposed to do in this instance,” said her campaign in a statement to GoLocal.

An earlier donation from another Oaktree executive was accepted and her campaign says it was below the threshold of an enforcement action by the SEC. Despite repeated requests for an answer, her campaign has refused to answer if Raimondo will return the earlier check from the other Oaktree executive.

“Politicians are supposed to lead - I don’t know if that’s the case anymore. But the proper course would have been to disclose this improper payment and that is an example of a far greater danger that the dark money poses, so not explaining all this is certainly not taking a leadership role,” said Siedle who has been critical of Raimondo’s investment strategies of shifting over $1 billion in investment strategies to high fee hedge funds as General Treasurer.

Raimondo’s successor as General Treasurer and fellow Democrat Seth Magaziner has moved to divest much of the state retirees pension funds from Raimondo’s hedge funds. “My Back to Basics strategy is getting the pension system healthy in order to provide retirement security for those who have dedicated their careers to public service and bring more stability to Rhode Island's finances," said Magaziner to GoLocal in October 2017.

“As an elected politician, Raimondo should have disclosed to the board the potential for direct and indirect dark money contributions to her campaign — and explained the dangers of both — and disclosed any potential violations of law," said Siedle.

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John Arnold, PHOTO: Twitter

Dark Money

Siedle says the Oaktree incident was a clumsy violation by Oaktree, the bigger threat is so-called, ”dark money.”

“There is a much greater danger of indirect dark money. This is the world we live in,” said Siedle.

"With Citizens United, now political contributions can go to PACs and other groups that are not direct contributors to a candidate. It’s much harder to track these payments. That’s where the big money is — think Engage RI,” he added.

Engage RI was the third-party political action committee that funded Raimondo’s pension reform effort. It was legally formed as a 501(c)4, a nonprofit that can do unlimited lobbying and campaigning. 

According to the website thetruthaboutarnold.com, former Enron Executive and conservative billionaire, “John Arnold donated hundreds of thousands of dollars to Engage RI, the PAC behind Raimondo’s campaign to cut benefits...” 

"As an executive at Enron, John Arnold walked away with an $8 million bonus at the same time that the company’s collapse decimated the retirement savings of rank and file employees. Meanwhile, the New York Times reported that Enron’s collapse sank $1.5 billion in public pension assets, negatively impacting the retirements of teachers, firefighters, and countless other public employees," claims the website funded by the National Public Pension Coalition and Californians for Retirement Security.


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