Alliance Passes First Tar Heel State Review

December 12, 2003 ( - North Carolina officials have determined that Alliance Capital Management has " properly managed and monitored" the state's assets in an initial review undertaken after regulators charged the firm in a widening mutual-fund probe.

However, North Carolina State Treasurer Richard Moore said Friday that the state hasn’t yet completed a broader review of Alliance and its investment and business operations (See  Tar Heel State Opens Alliance Inquiry ).

“Given the various inquiries and investigations, our office needed to be assured that the portfolio managers and analysts responsible for our accounts were continuing to perform their responsibilities in a diligent and unimpeded fashion on a day-to-day basis,” Moore said in a news release. “We are satisfied that this is, indeed, the case.”

Broader Review Pending

The broader review probably won’t be completed until after Alliance resolves settlement discussions with state and federal regulators, Moore said in the news release (See  Alliance Capital Proposes Fee Cut as Part of Settlement with Spitzer ). Moore said the state’s wider probe is looking at the “firm, its investment and business operations, the improper activities in Alliance’s mutual funds and the firm’s response.”

“It is apparent that ongoing settlement discussions between Alliance, the Securities and Exchange Commission and the New York State Attorney General, which have been widely reported by the media, could have important implications for the firms,” Moore said.

Other Actions

Other states also are reviewing their business relationships with Alliance as a result of the probe. Oregon investment officials will meet with Alliance Chief Executive Lewis Sanders next week to discuss the fund probe and issues related to it, according to Ronald Schmitz, director of investments for the Oregon State Treasury.    Oregon put Alliance on a watch list last month because of the probe, Schmitz said, according to Dow Jones. The firm manages about $3.3 billion for the state’s $40 billion retirement system.

And the Indiana State Teachers’ Retirement Fund has intensified its monitoring of the firm, according to Bob Newland, chief investment officer of the fund. Alliance manages a $1.5 billion fixed-income portfolio and a $400 million international equity index for the Indiana teachers fund. Indiana recently fired Putnam Investments, a Boston firm that managed about $60 million for the teachers’ fund. Putnam has also been implicated in the mutual-fund probe.