Key Takeaways
- • New Jersey and Ohio pension systems committed at least $650 million to Chatham Asset Management, a high-risk hedge fund that has taken control of National Enquirer parent American Media Inc. (AMI), according to a Capital & Main and MapLight investigation published in August 2018.
- • California's public pension fund held a $235 million stake in a Chatham fund, and the investigation says California pension exposure to AMI could have reached as much as one-third of the company.
- • New Jersey's $500 million in Chatham investments, made under Gov. Chris Christie's administration in 2013 and 2017, were reportedly worth as much as $692 million, per state records cited in the report.
- • Ohio's pension system, partially controlled by Gov. John Kasich's appointees, committed $150 million to Chatham in 2013 and 2014 and requested redemption in 2015; the money was redeemed in 2017.
- • AMI's legal exposure tied to the federal investigation into the 2016 Trump campaign, including the guilty plea of Michael Cohen, raises questions for public pension beneficiaries and state oversight officials.
Summary
A Capital & Main and MapLight investigation, co-published with Fast Company, reports that taxpayers in New Jersey, Ohio and California have held significant financial stakes in Chatham Asset Management, the hedge fund that has taken control of American Media Inc., parent of the National Enquirer. According to the documents reviewed by the outlets, New Jersey and Ohio committed at least $650 million of public pension cash to Chatham under Republican governors, and California's pension fund holds a $235 million stake in a Chatham fund.
AMI is at the center of a federal investigation into the 2016 Trump campaign. Per the Wall Street Journal, AMI executives helped Michael Cohen, Trump's former attorney, purchase stories that could have harmed Trump's presidential bid; Cohen recently pleaded guilty to campaign finance violations tied to payments to women. AMI has denied helping the campaign, and David Pecker was recently granted immunity in the Cohen probe. Former FEC commissioner Trevor Potter, head of the Campaign Legal Center, said the situation "presents a serious legal problem for AMI."
Chatham is run by Anthony Melchiorre, a Republican donor who reportedly met with President Trump and Pecker at the White House after the inauguration. New Jersey's Christie administration moved $300 million into the Chatham Fund, LP in 2013 and another $200 million into a Chatham vehicle in 2017, shortly before Christie left office. Records show the original $500 million is now worth as much as $692 million. Chatham manages $3.2 billion in assets. Ohio's pension system committed $150 million in 2013 and 2014 and asked for its money back in 2015; it was redeemed in 2017. Chatham has warned that a client "may lose its entire investment in a troubled company," and AMI represented 23 percent of the Chatham Asset Partners High Yield Fund's portfolio in late 2017 records.
New Jersey's Treasury Department said its Division of Investment is in regular contact with investment partners but plays no role in managing portfolio companies. State Investment Council trustee Tom Bruno said he would push for full divestiture if the allegations are true. Chatham did not respond to questions about its exposure to AMI's legal issues. Attorney Jay Youngdahl noted that pension-hedge fund agreements often contain clauses giving states recourse if retiree money is invested in companies engaged in criminal activity. In early 2018, Blackstone reportedly removed Chatham from one of its major investment funds.
AMI is at the center of a federal investigation into the 2016 Trump campaign. Per the Wall Street Journal, AMI executives helped Michael Cohen, Trump's former attorney, purchase stories that could have harmed Trump's presidential bid; Cohen recently pleaded guilty to campaign finance violations tied to payments to women. AMI has denied helping the campaign, and David Pecker was recently granted immunity in the Cohen probe. Former FEC commissioner Trevor Potter, head of the Campaign Legal Center, said the situation "presents a serious legal problem for AMI."
Chatham is run by Anthony Melchiorre, a Republican donor who reportedly met with President Trump and Pecker at the White House after the inauguration. New Jersey's Christie administration moved $300 million into the Chatham Fund, LP in 2013 and another $200 million into a Chatham vehicle in 2017, shortly before Christie left office. Records show the original $500 million is now worth as much as $692 million. Chatham manages $3.2 billion in assets. Ohio's pension system committed $150 million in 2013 and 2014 and asked for its money back in 2015; it was redeemed in 2017. Chatham has warned that a client "may lose its entire investment in a troubled company," and AMI represented 23 percent of the Chatham Asset Partners High Yield Fund's portfolio in late 2017 records.
New Jersey's Treasury Department said its Division of Investment is in regular contact with investment partners but plays no role in managing portfolio companies. State Investment Council trustee Tom Bruno said he would push for full divestiture if the allegations are true. Chatham did not respond to questions about its exposure to AMI's legal issues. Attorney Jay Youngdahl noted that pension-hedge fund agreements often contain clauses giving states recourse if retiree money is invested in companies engaged in criminal activity. In early 2018, Blackstone reportedly removed Chatham from one of its major investment funds.
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