Former Federal Pensions Chief Faces Criminal Probe

Business Week reports:

The former head of the federal pension insurer inappropriately interfered in a contracting process that ultimately led to the hiring of Goldman Sachs (GS), JPMorgan Chase (JPM), and Blackrock to manage billions of dollars in assets and earn $100 million or more in fees, a federal watchdog concludes in a draft report distributed on May 14. BusinessWeek has learned that a criminal investigation into some of the allegations raised in the report has been requested by a group of senators and will begin shortly.

The report calls into question the process used to award contracts for managing some $2.5 billion in assets at Pension Benefit Guaranty Corp. The report's author, PBGC Inspector General Rebecca Anne Batts, who will also handle the criminal probe, recommends that the Cabinet secretaries who oversee the agency consider whether the contracts should be revoked. The PBGC's acting director said the agency would decide whether to revoke the contracts.

Among other things, the report says Charles E.F. Millard, who stepped down on Jan. 20, improperly contacted some of the firms potentially bidding on the contracts and later sought and received job-hunting help from an unnamed executive of Goldman Sachs after the company had been awarded a contract to manage up to $700 million. The report also says Millard was warned not to engage in much or all of the activity it calls into question. The inspector general's inquiry was already under way before Millard's departure. Millard said earlier this month that he has been doing some consulting work while exploring different job opportunities.

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