Embattled state investment chief quits
Dec 4, 2007
BY GARY FINEOUT AND MARC CAPUTO
Coleman Stipanovich, the embattled Florida investment chief, announced he’s quitting just days after local governments withdrew a whopping $16 billion from a state fund due to concerns about the wisdom of risky-mortgage investments.
”Its time to move forward,” said Stipanovich, who noted his office consistently turned a profit on the nearly $150 billion in total government investments. The SBA is also consistently rated as among the best-run. “There are certain people who have reservations about the leadership I provided on this issue.”
Stipanovich defended the State Board of Administration investments, saying its portfolio was tied up in otherwise stable companies hurt by the subprime mortgage crisis that caught many by surprise.
Still, the default was big — $867 million of $2 billion in controversial investments — and local governments responded by pulling out more than half the money in the roughly $30 billion local-government investment fund that acts like a massive checking account.
Florida’s chief financial officer, Alex Sink, said she supported Stipanovich, but that his resignation is ”absolutely” the best thing to do.
”We needed to restore confidence not only in this fund,” said Sink.
Sink, Attorney General Bill McCollum and Gov. Charlie Crist voted last week to prevent any more local-government withdrawals from the fund. On Tuesday, they approved a new plan to break up the Local Government Investment Pool into two separate accounts and ”wall off” the questionable investments. Cities and counties will be allowed to make small withdrawals initially, but may not have access to all their money.
Also an outside financial investment firm was hired to oversee the new accounts.
The State Board of Administration controls not only the state’s massive retirement fund but other accounts include the local government investment pool. The recent financial troubles with the pool cast a negative spotlight on the agency, which lost more than $300 million during the collapse of Enron in 2001 and made a controversial decision to bankroll the purchase of a for-profit company that operates schools.
The Local Government Investment Pool was created 25 years ago as a way to provide a place for cities and counties to invest cash over a short period of time and operates like a money market fund.
In the last two weeks, roughly $10 billion has been withdrawn from the fund — including $3.5 billion Thursday morning — most of it coming in the wake of revelations that state investment managers had money in companies rocked by the housing slump and nationwide credit crunch.
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