RI’s Economic Study Funder Manages $65 Million in RI Pension Money
Monday, August 31, 2015
Rhode Island native Mark Gallogly, whose private equity firm, Centerbridge Partners, manages $65 million in Rhode Island pension fund money, has stepped forward to help fund a study by the Brookings Institution that's intended to recommend solutions to improve the state's economy.
The fact that Gallogly's company manages a large sum of RI pension fund cash raises questions about the study and whether its conclusions would benefit the industries of the study's funders.
Firewall?
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST"The big question here is how the donation is being handled," said John Marion, the executive director of the Rhode Island Chapter of Common Cause, a good government group that focuses on the issues of ethics, transparency, and the influence of money in politics.
"Is there a firewall between the donors and the researchers or are the donors picking the researchers and in contact with them? If there isn't than the people who care about the issue of government influence by private interests should be concerned, but i would expect academic institutions to have those safeguards in place."
Gallogly, a wildly successful alternative investment manager who now resides in New York, declined comment for this story though his spokeswoman at Centerbridge. Gallogly, in addition to founding his firm, also served on President Obama's Economic Recovery Advisory Board. Gallogly has made political campaign contributions to Governor Gina Raimondo, as well as US Senators Sheldon Whitehouse and Jack Reed according to data on the Federal Election Commission's website.
The issue of studies and the independence of the researchers who perform those studies made news earlier this month when the New York Times reported that a new study, which claimed that the key to losing weight and maintaining a healthy body weight, was primarily a matter staying active and exercising regularly, not restricting caloric intake, was funded by Coca Cola, the world's largest producer of sugary beverages. The study's results basically followed the old adage that consultants have a tendency to tell their employers what they'd like to hear.
Brookings Values Independence
Mark Muro, the Senior Fellow and Director of Policy for the Brookings Institution, emphatically guaranteed that the research would be conducted completely independently, and wouldn't take into account the interests of the folks who funded the study to the detriment of the larger economy. To do otherwise, he said, would be to violate the mission of the Brookings Institution, which is to produce independent research.
"Brookings holds itself to an ethic of absolute independence in the research we do and the conclusions we draw," said Muro. "We are by definition an independent research and policy organization. We zealously maintain our independence, and create rounds of internal and external review of our work to guarantee its quality and independence."
Donors are from Finance World
The study will look at Rhode Island's strengths and suggest a short list of action points that will improve the state's economic outlook. In addition to Gallogly, the study is being funded by 2 other individuals--Stephen Mugford, an executive with Capitol One Financial Corp., and Thomas R. Wall, who works at a private equity form Kelso--and 3 other foundations--the Rhode Island Foundation, van Beuren Charitable Foundation, and The Fascitelli Foundation.
Phil West, the former executive director from Common Cause, and author of Secrets and Scandals: Reforming Rhode Island, 1986-2006, said that the fact that there are several organizations funding the study as opposed to just one is a good sign.
"That makes me much less inclined to be suspicious than if there were just one person funding the study," said West.
The idea of the study is something that's been kicked around about for some time, particularly by Governor Gina Raimondo, said Muro. Muro said Raimondo was working last year to jumpstart a study prior to her inauguration along with then-Governor Lincoln Chafee, but for some reason the study never became a reality until as of late.
Gina Raimondo's spokeswoman didn't return a request for comment on this story.
Central Planning?
Muro also said that the study will host three town hall style meetings sometime later next month and in early October, although the exact dates haven't been finalized. The study's authors want to hear from every stakeholder in Rhode Island who is interested in being heard, he said, and he encourages people to stay tuned and to attend the meetings.
"We want to hear from everybody," said Muro.
Justin Katz, a the research director of the Ocean State Center for Freedom and Prosperity, a center-right think tank, said that he doesn't necessarily believe there's anything nefarious going on with respect to the people who are funding the study, but instead sees it as a natural result of centralized government planning.
"The key to progressive central planning is the notion that the smart people on the inside can make better decisions than the broader public can. Wealthy finance mavens see themselves as part of that cognitive elite, so they incline toward that sort of worldview. The charitable view is that their main objective is to make the world a better place, and the fact they get fabulously rich in the process is just a nice side effect (that allows them to invest more in redesigning the world)," Katz wrote in response to an emailed question.
Finance Industry Under Fire
In any event, all three of the study's individual funders are from the world of finance. In 2011, Raimondo garnered criticism when Engage RI, the group Raimondo helped organize to lobby for pension reform that year, received a $100,000 from John Arnold donated somewhere between $100,000 to $500,000. Arnold was a former energy trader at Enron, and later funded his own Texas based hedge fund, which later closed up shop. Arnold is worth somewhere around $3 billion according to Forbes.
The world of finance, particularly alternative investments (hedge funds, private equity, real estate funds), has come under fire as late from an unexpected place--the Republican Presidential Primary race.
Donald Trump, the richest person running for President, of all people, has been criticizing hedge fund managers, saying they aren't paying enough in taxes. Trump has been telling crowds that hedge fund managers are "getting away with murder" with respect to how little they've been paying in taxes, and called them glorified "paper pushers". Trump has parlayed that populist rhetoric with a call for lowering taxes on the middle class (in exchange for raising them on hedge fund managers).
Related Slideshow: Timeline - Rhode Island Pension Reform
GoLocalProv breaks down the sequence of events that have played out during Rhode Island's State Employee Pension Fund reform.
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