Sunday, April 14, 2013

Writ of Mandamus: SC Commission Sues the Treasurer

Writ of Mandamus:  SC Commission Sues the Treasurer

If you've read my bio you know that in my distant past I went to law school and served as a legal counsel in New York.  However, that was so long ago that whatever legal skills I possessed have largely vanished.  So I can't really comment on the legal merits of the SC Commission's suit to compel the State Treasurer, Curtis Loftis, to satisfy a capital call from Warburg Pinkus.  I vaguely recall that Courts are reluctant to compel the executive branch, and so the Writ of Mandamus is seldom invoked. Treasurer Loftis has, apparently, been trying to get certain written documentation before authorizing the custodian bank to wire funds.  The Commission lawsuit, which will be heard by the South Carolina Supreme Court, is asking the Court to force the Treasurer to undertake a "ministerial act."   I think the lawsuit is more than a bit odd.
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First in my own naive way, it looks like the executive branch of SC is suing itself.  If I were a judge, I'm not sure I would be getting into the middle of a dispute between the Commission and the Treasurer.

Second, I'm curious whether the Commission can bring an action without representation by the Attorney General.  In many States, the AG is the executive branches lawyer.  Perhaps, in SC it works differently, or the commission has independent authority.  The law in NC was a bit ambiguous, but in my experience as CIO, we always worked cooperatively with Attorney General, Roy Cooper.

Third, I doubt there's been any measurable damage to the SC plan.  As far as I can tell from the complaint, the Warburg investment is new.  So the worst that happens is that the SC Retirement System defaults on the investment, and Warburg removes them from the fund.  Since no money has been invested, there's not much harm.  Moreover, since SC is already heavily committed to alternatives, there might be some actual benefit to increasing the pension plan's liquidity profile.  The Commission argues that the plan has incurred some interest penalties for being tardy.  In fairness, Treasurer Loftis did vote to approve the investment.

The Commission's lawsuit attempts to characterize the Treasurer's role as a mere "ministerial" act -- just wiring some money.    Just from looking at the publicly available record, it seems to me there's more going on here than that.  If I were a SC Supreme Court Justice, I'd be reluctant to tell the State Treasurer how do to his job.  Moreover as future retirees, the Justices might like Treasurer Loftis to get to the bottom of his concerns about the risks and structure of the existing investments.

The Commission first censured the State Treasurer, which is when I first picked up on this saga.  Treasurer Loftis must be treading on some sensitive issues to be getting this kind of reaction.

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