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Wednesday, November 26, 1997

Donations questioned in school fund flap

By PEGGY FIKAC / Associated Press Writer

AUSTIN (AP) -- A State Board of Education member who voted for nine outside money managers to handle $2.5 billion of Texas' public school trust fund said Tuesday three of the firms were linked to substantial donations he received in his failed state Senate campaign last year.

The board member, Monte Hasie of Lubbock, said he received the donations totaling $22,000 well before the board took up the money-manager issue this year. Hasie, a stockbroker, said he sees nothing wrong with his voting on the firms.

But fellow board member David Bradley of Beaumont -- who wants to re-do the contract-award process because he said there were a number of problems with it -- called it "a clear violation of ethics."

"He definitely had a conflict of interest. He's the one who's been leading the charge to hire external managers," Bradley said.

Hasie said a lawyer has determined the donations were legal. He said he voted for all the firms that were recommended by a consultant to avoid questions.

"Someone can try to make it sound bad. I didn't do anything that was wrong," he said.

Hasie did suggest in a letter to Chairman Jack Christie of Houston that the board discuss limiting such contributions or requiring bidding businesses to disclose them.

"Because the financial service industry experiences frequent turnover of personnel and reorganization, I am concerned that a board member could accept a contribution without even knowing it came from someone associated with a business bidding for a contract," said Hasie.

Hasie and Bradley serve on the board's five-member School Finance-Permanent School Fund Committee. The committee, with Bradley abstaining, recommended the nine in September and the full board approved them.

Of the $16 billion Permanent School Fund, about $4.3 billion now is managed by outside firms. Plans call for the total managed by outside firms be raised to $5.8 billion, and for the nine new firms to manage $2.5 billion of that.

But the contracts have been put on hold while the Texas Education Agency staff looks into concerns raised by Bradley.

A special Dec. 9 meeting had been scheduled, but Christie canceled it, saying Bradley hadn't provided him with evidence of impropriety. He said the board could consider the issue in January.

Christie also defended Hasie and board member Rene Nunez of El Paso, a school fund committee member who also ran unsuccessfully for Senate last year.

Nunez told Christie in a letter that he got contributions "from a number of individuals, businesses and professional groups. All of them were legal and properly reported.

"Nevertheless, at least one business applied a year later to be one of our outside investment managers," Nunez wrote.

In a Tuesday interview, Nunez said he meant to write that one business could have applied, not that one did. He said he hasn't found any connection between his donations and people who work for the 13 money-manager finalists. He also said he would not have accepted a corporate check.

Nunez said the board should require bidders to disclose any contributions to board members before awarding a contract.

Hasie said of his donations, $5,000 came from Robert Burdick, a friend who works for money manager Loomis Sayles.

Hasie said Davis Hamilton Jackson & Associates was influential in a political action committee giving him $15,000, which he said may have been his largest donation. He said Columbia Partners was influential in another PAC giving him $2,000.

Hasie said he raised a total of $250,000 to $270,000 in the Senate race.

Christie said Hasie and Nunez "have the utmost of integrity ... I don't think they would do or be influenced whatsoever in their decisions in the state board operations or the Permanent School Fund operations."

But Christie said he would support barring donations to board members from anyone who bids to be a school fund money manager.