Attorney General Bill McCollum's role as trustee for state investment fund may be a conflict

When it comes to the board that supervises state public investments, Florida is different. It may be the only state that has its attorney general double as an investment fund trustee.

Ethics watchdogs say it's an inherent conflict of interest: The state's top law enforcement officer and top legal adviser cannot provide independent legal advice to a board that he sits on.

Come Tuesday, the three trustees who oversee Florida's State Board of Administration could decide how to reshape the board, possibly by recommending more people on it. Apparently not under consideration is why Florida's attorney general is on the board to begin with.

The trustees supervise $133.7 billion of public investments, including Florida's pension funds for 1.1 million current and retired public employees.

The trustees also happen to be the state's top political leaders — Gov. Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum.

That's unusual in itself.

Many large public investment boards in other states have between seven and 11 people on them, and some include retirement plan participants or financial experts. When the SBA recently surveyed 15 funds, it didn't find any that had a governor or an attorney general on their boards, though several had the governor appoint one or more representatives.

"How can an attorney general head an investigation that might include the trustees? That creates an obvious conflict of interest,'' said John Boatright, a professor of business ethics at Loyola University Chicago.

David Hess, a professor of business ethics at the University of Michigan, framed the potential conflict this way:

An attorney general is often called on to provide legal advice to public fund managers and their governing boards. If he doubles as a fund trustee, Hess said, it "would be difficult for the attorney general to provide any sort of independent legal advice.''

The attorney general wasn't always a board member in Florida. For decades, the three SBA trustees consisted of the governor, Florida's comptroller and its treasurer/insurance commissioner/fire marshal.

In 1998, Florida's Constitution Revision Commission recommended combining the offices of the comptroller and the treasurer into the office of Chief Financial Officer. That would have reduced the SBA board to two trustees, so the state commission proposed adding the attorney general to the board.

The voters agreed.

Dexter Douglass, who led the Constitution Revision Commission, said he doesn't recall any discussion in 1998 about possible conflicts in the roles of SBA trustees.

Douglass, a Democrat who served as general counsel to the late Gov. Lawton Chiles, said having an attorney general on a large investment board doesn't create any oversight problems. "The other members could also have a conflict,'' he said.

All three trustees serve constituencies that are sometimes at odds. For example, the trustees have to balance pension promises made to current and future retirees against the burdens of other taxpayers who help pay for those pensions.

The competing interests are heightened now, with all three trustees running for higher office.

In 2003, Charlie Crist became the first attorney general to join the SBA board. Crist remained on the board when he became governor in 2007, and Bill McCollum, his successor as attorney general, joined him.

McCollum would not be interviewed for this story. His spokeswoman, Sandi Copes, said that "having the state's highest elected officials in positions of authority over these agencies provides for good responsibility and accountability to the people of Florida.''

Under Crist, Sink and McCollum, the SBA has come under criticism for misleading practices and loose oversight of risky deals that have gone south.

At Sink's request, the SBA began examining how it is governed. It could take up recommendations for improvements as early as Tuesday.

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A national task force of more than 30 attorneys general who are looking into pension fund abuses illustrates the awkwardness of Florida's attorney general wearing two hats.

The task force is sharing information and leads about a lucrative business where lobbyists, known as placement agents, help secure investment deals for private equity firms.

Placement agents can make 1 to 2 percent of the deal. If, for example, a state agrees to invest $100 million, the placement agent can make $1 million to $2 million.

The nationwide task force was organized by the attorney general in New York, where investigators were probing kickbacks paid to well-connected placement agents. One of the firms under scrutiny was the Carlyle Group, which admitted no wrongdoing but paid $20 million to settle its role in the New York case.

Carlyle, one of the world's most politically connected private equity firms — it once employed former President George H. W. Bush — is a major player in Florida.

Records show that since 1996, Carlyle has been awarded more than $900 million in Florida investment funds. In the last two years, it has earned more than $12 million in fees from the SBA. Carlyle said it used only in-house employees to market to the SBA, not third-party intermediaries.

For months, the pension task force included most of the nation's attorneys general, but not from the state that has the fourth-largest pension fund. Why was Florida not participating?

Copes said McCollum's office tried to participate but was "unceremoniously removed from the group'' because they couldn't sign a confidentiality agreement. The agreement, they said, conflicted with Florida's public records law.

But a spokesman for New York Attorney General Andrew Cuomo said that nobody was removed from the group and that McCollum was still welcome to be part of the task force.

New Jersey, like Florida, has a public records law, but the New Jersey attorney general managed to stay in the task force. They just avoided signing the confidentiality agreement.

"There was no need to sign it,'' said Jeff Lamm, a spokesman for a branch of the New Jersey Attorney General's Office, because "we can't release the information anyway. … Any materials related to active investigations are not considered public records'' under New Jersey's public records law.

Florida has a similar exemption for active investigations under its public records law.

McCollum's office said it was protecting Florida's public records, and that's why he couldn't be part of the task force.

When the St. Petersburg Times asked for SBA agreements with Carlyle under Florida's public records act, Carlyle and the SBA declined to turn them over. Carlyle and the SBA said the agreements contained trade secrets and were confidential.

Unlike some pension funds, the SBA does not collect information on fees that investment firms pay to intermediaries. Placement agents are not required to register or publicly report whether they contacted any official with influence over investment decisions.

Late Friday, after the Times inquired about the conflicting statements between the Florida attorney general and the New Jersey and New York attorneys general, McCollum's spokeswoman said it had all been a misunderstanding about the multistate task force. Now it has been resolved.

Florida will rejoin the group.

Times computer-assisted reporting specialist Connie Humburg and researcher Shirl Kennedy contributed to this report.