The TV networks have enough trouble noticing a single governor's race across the country. But for some reason, the attorney general's race in New York drew attention when Republican candidate Jeanine Pirro drew a federal investigation for wanting to have her cheating husband wire-tapped. (NBC's Today has aired five segments or mentions of Pirro in the last ten days.) Will NBC and others in national TV news report on her opponent, Andrew Cuomo, and his weird habit of investing campaign money in risky hedge funds run by supporters? The New York Times reported on page A-24 on Friday:
Two years ago, Andrew M. Cuomo put more than half of his campaign treasury into a hedge fund, making him one of the few New York politicians to invest campaign money in anything riskier than a sure bet.
In the case of Mr. Cuomo, the Democratic candidate for attorney general, the hedge fund was directed by one of his largest financial backers, a man who also handled Mr. Cuomo’s personal money. The investment of $750,000 turned out to be all upside, with a return of nearly 20 percent after one year.
Mr. Cuomo’s experience is a rarity in an arena where most campaigns, focused on their short-term needs, keep their money in conservative vehicles like savings accounts.
Investing campaign money in hedge funds also presents special concerns, government watchdogs say, because of their unregulated nature. Given the secrecy of such funds, who can say, they ask, whether a high return reflects a smart bet or simply a campaign supporter’s efforts to evade contribution limits by padding the return of a favored campaign account.
"There’s no way to know what’s going on with a hedge fund," said Fred Wertheimer, president of Democracy 21, a Washington-based nonpartisan group that works to reduce the influence of money in politics. "The candidate knows, and the hedge fund manager knows, but the public doesn’t."
In Mr. Cuomo’s case, one of the hedge fund’s three founders, his wife and officers of the fund — known as EnTrust Capital Partners L.P. — have donated nearly $175,000 to the last two Cuomo campaigns.
Mr. Cuomo’s campaign said that the EnTrust fund was "low volatility," adding that Mr. Cuomo had not received any guarantee of positive returns.
Wendy Katz, a spokeswoman for the campaign, wrote in an e-mail message to The New York Times, "The rationale for investing campaign funds in a hedge fund is the same rationale employed by nonprofits, universities (for example, Harvard and Columbia), state and city public pension funds and charitable foundations for investing in hedge funds, which is to grow the asset and maximize returns."
The Cuomo campaign, however, was given special consideration by EnTrust. It gave the campaign one of 35 slots in the fund that federal regulations allow for investors who do not meet minimum total asset requirements, which in the case of the campaign would generally be $5 million. EnTrust also waived its usual minimum investment requirement of $1 million.
It's intriguing that this story has liberal campaign-finance watchdogs upset, the kind of people that can usually drive a story into the "mainstream" media. Reporter Russ Buettner also found a local Common Cause boss who's disturbed:
In the case of Mr. Cuomo’s campaign, Rachel Leon, executive director of Common Cause New York, an organization that monitors campaign finance, said that the hedge fund investment was troubling, given that hedge funds are run privately, pick and choose their investors, and can be run by political supporters who benefit financially from the campaign’s investment. “It raises multiple questions on multiple levels,” she said.
But with this story's novelty, what's it doing on page A-24? It's not like Jeanine Pirro's personal life didn't make Page One of the Times (although the Clinton comparisons are apt). The print headline was wimpy: "Hedge Fund, With More Risk, Added to the Campaign Coffers." (The online headline sounds promotional: "Cuomo Turns to Hedge Fund and It Pays Off." Like it could be used in EnTrust commercials.) The text box in the article reads simply "Campaigns tend to invest money in more conservative ventures."
I probably wouldn't expect Christopher Cuomo at ABC to be the lead watchdog on this story...
