Steve Beshear Sought To Help Political Supporters Working For Private Investment Companies With Kentucky's Pension Agency.

Beshear's office sought meetings for political allies at pension agency
By John Cheves

At least twice in recent years, Gov. Steve Beshear's office called the Kentucky Retirement Systems to suggest meetings with two of the governor's Democratic political supporters who were working on behalf of private investment companies.

The supporters were Mark Guilfoyle, a Northern Kentucky lawyer and lobbyist who helped lead Beshear's 2007 transition team, and Jill Daschle, wife of the then-executive director of the Democratic Governors Association and daughter-in-law of former U.S. Senate Democratic Leader Tom Daschle.

Guilfoyle worked with Fort Washington Investment Advisors, based in Cincinnati, although he said in an interview that he was not paid. Daschle is managing director of investor relations at EnTrust Capital, based in New York.

The companies wanted to manage part of the multi-billion-dollar pension fund for state and county government retirees, said Mike Burnside, KRS executive director until he was fired last month. Both companies were given meetings, although neither won a contract with KRS, Burnside said.

"The only reason I took the meeting (with Guilfoyle) is that I was called by the governor's office and asked to meet with Guilfoyle and his client," Burnside said. "I received a similar request from an aide to the governor to meet with Jill Daschle, (who) had a client trying to do business with KRS as well."

State Sen. Damon Thayer, R-Georgetown, on Tuesday said he was "outraged" to learn that the governor's office was making calls to promote certain investment firms at the pension system.

"We have enough problems with our public pensions in Kentucky that we don't need Governor Beshear playing politics with them," said Thayer, chairman of the Senate State and Local Government Committee. "The governor has some explaining to do."

Asked why the governor's office would call KRS in these instances, Beshear spokeswoman Kerri Richardson said such calls are meant to be "referrals," not endorsements intended to pressure state officials on anyone's behalf.

"Every day, the governor's office receives requests for information or offers of services, which are then routed to the appropriate agencies," Richardson said. "The governor's ultimate objective for the retirement system is the protection and growth of funds for the benefits of hundreds of thousands of current and retired public employees."

Ultimately, KRS rejected Fort Washington's investment offer in 2009. But that same year, the company won a contract to manage $200 million in high-yield bonds for the state's other sizeable pension fund, the Kentucky Teachers' Retirement System.

Officials at KTRS said they chose the company through open competition, and they were not advised by the governor's office, Guilfoyle or any other third party. The governor appoints three members of the KRS board of trustees, including its current chairwoman and vice chairman, but he does not appoint any KTRS board members.

"Nobody recommended them. We did it on the basis of our own study, as we always do," said Robert Conley, who heads the KTRS board's investment committee.

Pension inquiries

In September, the U.S. Securities and Exchange Commission opened an "informal inquiry" into KRS' use of "placement agents," well-connected middlemen who help sell investment services to pension funds. A review last year disclosed $15 million in agent fees, angering several KRS board members, who called the fees unnecessary. But none of those agents appeared to have direct ties to Kentucky politicians.

State Auditor Crit Luallen is in the final stages of her own broad examination of KRS, including the role of placement agents, which is scheduled to be presented next month to Thayer's legislative committee.

Unlike those previously identified, Guilfoyle and Daschle both have ties to Beshear, his senior staff and other Kentucky Democratic politicians.

Guilfoyle, who was an aide to Democratic Gov. Brereton Jones, and his wife have given at least $61,000 in political donations since 1998, including checks to Beshear and the Kentucky Democratic Party. He has been a Democratic Party leader and campaign strategist.

In 2007, Guilfoyle led Beshear's transition team at the Finance and Administration Cabinet, where he got to know Burnside, the outgoing finance secretary under Gov. Ernie Fletcher, according to interviews with Guilfoyle and Burnside. Burnside then took charge of KRS.

Fort Washington had "been calling on KRS and their consultants since 2006. Mark Guilfoyle helped to facilitate a call with the executive director," said company spokesman José Marques. "Mr. Guilfoyle is not a placement agent, as Fort Washington does not use placement agents."

Guilfoyle said he called Burnside to schedule the meeting for Fort Washington, which he also attended. Guilfoyle said he does not recall asking anyone in the governor's office to get involved.

"The bottom line is, I charged nothing to arrange the meeting and I never had any expectation of compensation," Guilfoyle said. "People help out friends for free every day, or at least I do."

"On our behalf"

Daschle, at EnTrust Capital, did not return calls seeking comment.

Bruce Kahne, EnTrust Capital's senior managing director, said Daschle wanted to approach KRS, so she spoke to a friend of hers, Vince Gabbert, then Beshear's deputy chief of staff. Daschle and Gabbert knew each other from Democratic election campaigns. Daschle's husband, then-chief of the Democratic Governors Association, worked to get Beshear elected in 2007.

Gabbert called Burnside "on our behalf," Kahne said.

Gabbert, now a vice president at Keeneland, said Tuesday that he did not remember making such a call.

"I'm not disputing him, but I don't recall talking to Mr. Burnside about this specifically," Gabbert said. "I can tell you this, I have never encouraged anyone to do business with anyone that wasn't on the up and up."

From 2005 to 2007, EnTrust Capital employed another Kentucky Democratic political operative, Mark Riddle, Kahne said. Riddle, a Frankfort lobbyist, has helped run campaigns for U.S. Rep. Ben Chandler, Attorney General Jack Conway and other prominent Democrats.

In an interview, Riddle said he introduced EnTrust Capital to officials at KTRS, the teachers' pension system, but not KRS. EnTrust Capital did not win a contract, he said.

"It never led to anything. And I was never compensated for anything," Riddle said. "I made a thousand dollars a month for, like, a year."

KTRS did meet with EnTrust Capital "a few years ago" and gave it the thumbs down because "it wasn't an attractive investment opportunity," said Robert Barnes, general counsel for the teachers' pension system.

Also, unlike KRS, KTRS avoids working with placement agents, Barnes said.

"Very simply, we don't do business with vendors who do business with placement agents," Barnes said. "There's a potential that if some payment is being made to someone who can influence the investment decisions, then you at least have the risk of it looking like a conflict. We decided, why run that risk?"

Riddle was an EnTrust Capital employee, not a placement agent, Kahne said.

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