The State Employees Association of North Carolina today announced the filing of a complaint with the Securities and Exchange Commission’s Office of the Whistleblower for possible breaches of the SEC’s “pay-to-play” rule involving State Treasurer Janet Cowell, former White House Chief of Staff Erskine Bowles and his wife, JP Morgan Board of Directors member Crandall Bowles.

“This is the type of abuse we were afraid we would find when we investigated the fees associated with our retirement system,” said SEANC Executive Director Dana Cope. “We won’t stand for our members’ retirement security and hard-earned money being used as a bargaining chip in a political game.”

In the complaint, SEANC alleges that Erskine and Crandall Bowles violated the pay-to-play rule when Cowell worked with Bowles and his firm, Carousel Capital, on investments through the N.C. Innovation Fund after Bowles hosted a fundraiser for her at his home.

Cowell announced the creation of the fund in March 2010 in a press release with Bowles, who founded Carousel Capital and is listed as a senior advisor on its website, praising the idea. Bowles’ son, Sam, was vice president of Carousel Capital at the time. Then in 2011, three months after the SEC’s rule took effect, Bowles and his wife Crandall hosted the fundraiser for Cowell. A few weeks after the fundraiser, Carousel Capital was selected by Cowell to help invest an undisclosed portion of the $230 million N.C. Innovation Fund, all of which came from the state retirement system. The firm already managed other investments for the pension system as well.

The SEC’s rule clearly prohibits financial professionals or firms that manage state money from “coordinating or soliciting any person [to] make any contribution to an official or a government entity to which the adviser is providing or seeking to provide investment advisory services.” It also includes a “look back” period prohibiting contributions two years prior to any state investments and bars such professionals or firms from funneling payments through third parties to circumvent the rule.  

SEANC filed a similar SEC complaint in April regarding possible violations of state and federal law surrounding investments made with the $90 billion Teachers and State Employees Retirement System.