Illinois looks for conflicts in manager contributions to Rauner

Managers that failed to disclose political donations to state campaigns face consequences ranging from a warning to termination of contract, he said.

Rauner’s campaign collected more than $66 million in donations by the Nov. 4 election, which saw the Republican edge Illinois’ Democratic incumbent Pat Quinn with 51 percent of the vote. A Buyouts analysis of state election data found that people with close ties to private equity and venture capital contributed $2.25 million to the campaign through Sept. 19.

“We’re contacting firms that we’ve been called about, who we’ve been told made contributions (to state campaigns),” Atwood said. 

His staff will review state elections records to make sure investment managers disclosed all donations to candidates who were elected to be state officials. The review will only apply to donations made by firms’ senior executives and any investment professionals who work directly ISBI’s accounts.

Atwood plans to report on the review’s findings finding at ISBI’s Dec. 5 meeting, he said.

The $2.25 million Rauner collected from private equity and venture capital executives includes at least two donations from fund managers with active vehicles in ISBI’s private equity portfolio.

In March, Vista Equity Partners Principal James Hickey donated $350 to Rauner’s campaign. The Illinois State Board of Investment committed $30 million to Vista’s fifth flagship fund in April. Hickey’s contribution did not exceed the SEC’s $350 cap on political donations for investment advisers seeking state or local funding. It is unclear if Vista disclosed the donation to ISBI prior to receiving its commitment, Atwood said. If Vista failed to disclose Hickey’s contribution, it may have violated ISBI’s rules for donations to public officials.

Vista Equity did not respond to requests for comment.

Robert Cummings of Wind Point Partners also donated $350 to Rauner’s campaign. However, because the board’s $15 million commitment to Wind Point preceded its adoption of a political campaign disclosure requirement in 2009, the firm was not obligated to disclose the contribution, Atwood said.

Disclosure policy

The Illinois State Board of Investment oversees $15.1 billion on behalf of the state’s General Assembly Retirement System, the Judges’ Retirement System of Illinois, and the State Employees’ Retirement System. ISBI requires potential fund managers to report any possible conflicts of interest with the board, Atwood said.

Although ISBI does not necessarily exclude managers whose executives may have contributed to local political campaigns, “these issues just need to be disclosed. It just raises an issue that otherwise wouldn’t be there,” Atwood said.

ISBI adopted its disclosure policy to root out any potential conflicts of interest with its board, which includes four elected officials. Governor appointees fill the five remaining seats. Although Governor-elect Rauner will be responsible for appointing board members, his office will not shape ISBI’s investment strategy, Atwood said.

Trustees typically recuse themselves from investment decisions in which there may be a conflict of interest, Atwood said. Furthermore, board members and staff are obligated to disclose any conversations with outside parties about investment opportunities.

“That happened to me once in the last seven or eight years, where someone in the governor’s office gave an opinion on a certain manager, and that was disclosed very aggressively,” Atwood said.

The Illinois State Board of Investment held $657 million in private equity assets as of Sept. 30, according to an investment report.