Bad Investment Could Cost MD Millions

March 22, 2002 ( - Maryland's state retirement fund could be out $4 million because a former investment advisor committed millions of pension dollars to shares of its own parent company's stock.

Quoting a Baltimore Sun story, the Associated Press said two Chapman Capital Management officials bought 395,000 shares of at $13 a share – almost a third of’s outstanding stock – as part of an initial public offering (IPO). Shares are now worth $0.17.

Maryland’s state pension board took control of the shares in February and began selling some of them. However, state Comptroller William Donald Schaefer said he is reluctant to sell while the price is so low.

After discovering the transaction, the pension board fired Chapman Capital Management, which had run about $175 million for the $27-billion fund.

Nathan Chapman Jr., Chapman Capital’s chief executive, told reporters that his money managers had been using state pension money to buy his company’s stock since 1998 and that pension system officials knew about the investments.

“I discussed the position with clients at various times – including the state of Maryland retirement system – and no client ever had an issue with it,” the Associated Press quoted Chapman as saying.

Chapman, who is also chairman of the University System of Maryland board of regents, owned up to 65% of before the IPO.