For North Carolina’s Treasurer-Elect the Biggest Challenge is Judgment
After digesting the results of the recent election I began writing a post about the policy challenges facing the next Treasurer of North Carolina, Dale Folwell. In preparing my post, I did a bit of research on the Treasurer’s-elect’s views about the state pension. In the course of my research, I ran across a Facebook post from his campaign that caught my attention. In celebrating his victory Mr.
Folwell encouraged his supporters to help him retire $500,000 in campaign debt. Early in the election cycle politicians routinely lend money to their campaigns in order to launch their bid for public office. Treasurers Boyles and Moore made small loans to their campaigns which we were retired as they raised funds. Mr. Folwell did the same thing before going much further in funding his campaign.
According to Mr. Folwell’s election committee at least $350,000 of the debt is owed to Mr. Folwell. Mr. Folwell probably loaned the remaining $150,000 to the campaign, but we won’t know until the campaign files its fourth quarter report in early 2017. According to the third quarter report to the State Board of Elections Mr. Folwell’s campaign had raised about $585,000 from contributors, which means that the loans weren’t just for start-up expenses. A substantial part of his campaign was run on loans.
On Mr. Folwell’s website, he describes himself as a “highly successful investor and financial consultant.” While the loan is large, I figured that Mr. Folwell could easily afford to make the loan given his statement about his investment prowess. I decided to check the Investment Advisor Data Base to find Mr. Folwell’s investment affiliations and licenses. I didn’t find any records. I checked Mr. Folwell’s Statement of Economic Interest (SEI) filed with the North Carolina Ethics Commission. I expected the document to show a list of investments or investment income that would provide some indication of Mr. Folwell’s investment portfolio. Instead of a broad investment portfolio, I found that Mr. Folwell and his wife own five stocks, a checking account, a couple of homes, and some raw land. In other words, there wasn’t much of a record for a “highly successful investor.” Instead, the SEI seemed consistent with Mr. Folwell’s record of public service.
My research has left me with an unsettled feeling. Our next Treasurer and sole fiduciary of the North Carolina pension plan has a large campaign debt that he’d like contributors to extinguish so he can pay himself back. It’s less than ideal for a fiduciary to be under any financial pressure when he invests funds on behalf of retirees and other beneficiaries. On the one hand, paying off the debt may prove easy because contributors might feel they can buy influence by helping the new treasurer replenish his bank account. On the other hand, he might not be able to eliminate the debt, which would be a blow to his personal financial position. In other words, Mr. Folwell might have a large hole on his personal balance sheet unless financial institutions, PACs, or others who do business with his office erase the campaign loans.
As a seasoned politician, Mr. Folwell understands that running an effective statewide election requires a substantial amount of money. Without money, it is difficult to win office in our current political environment. However, certain means of financing a campaign are problematic, especially when the candidate is running for an office that is predicated upon judgment, prudence, and foresight. As a “highly successful investor” the newly elected Treasurer should have known that a high degree of leverage is a risky proposition. He should have also been aware that soliciting campaign contributions to retire a substantial debt creates potential conflicts of interest with his new duties.
Judgment is the key ingredient for a successful fiduciary. After seven years in office, our current Treasurer’s judgment failed her. Treasurer Cowell saw nothing wrong in serving on the boards of public companies while managing the 12th largest pension plan in the United States. In my view, our new Treasurer’s judgment is already in question. Mr. Folwell enters office with a large campaign debt hanging over his duties as State Treasurer.
 Dan Blue, III, Mr. Folwell’s opponent loaned his campaign $1,000 at the beginning of his election effort. http://cf.ncsbe.gov/cf_rpt_search_org/cf_report_detail.aspx?RID=141977&TP=OTL