Former U.S. pension agency director probed

[Joanne98]

WASHINGTON, May 14 (Reuters) - The former director of the U.S. agency that insures pensions violated prohibitions on contacting bidders that were seeking investment contracts, including eventual winners BlackRock (BLK.N), Goldman Sachs (GS.N) and JPMorgan Chase (JPM.N), according to an official investigation.

The firms were hired under former Pension Benefit Guaranty Corp Director Charles Millard to manage real estate and private equity investments for the PBGC as part of an effort to boost agency investment returns.

A draft report by the PBGC's inspector general says phone records and emails show Millard was communicating directly with some bidders at the same time he was evaluating their proposals, in "a clear violation of the prohibition of contact with potential offerers."

Efforts to reach Millard were not immediately successful but in a letter to Inspector General Rebecca Batts, that was appended to the draft report, Millard says his contacts were "legal and ethical" and not related to the contracts.

Representative George Miller, the Democratic chairman of the House Education and Labor Committee, said the panel was opening an investigation into Millard based on the inspector general's report.

The PBGC in February of 2008 approved investing in a broader range of instruments, including more international equities and forays into other investments such as private equity and real estate.

Critics have said the policy exposed PBGC's portfolio to excessive risk.

PBGC Acting Director Vince Snowbarger issued a statement on Thursday saying the agency was considering terminating the contracts and that no assets had yet been transferred to the investment firms.

"We will work with our board to decide whether these contracts should be terminated and whether strategic partnerships fit into the board's investment approach going forward," Snowbarger said in a statement.

The PBGC insures "defined benefit" pensions for about 44 million workers and retirees in over 29,000 private-sector plans. Companies pay premiums to the PBGC, which steps in when pension plans become insolvent.

Millard, a former Lehman Brothers executive and official in the administration of former New York City Mayor Rudolph Giuliani, became PBGC director in late 2007 under the Republican administration of President George W. Bush. He left the agency in January as Bush left office.

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http://www.reuters.com/article/etfNews/idUSN1452389120090515