Conn. CIO's Abrupt Exit Spurs Questions

Jan. 2, 2001 ( - There's a new Chief Investment Officer opening at State of Connecticut - but potential applicants might want to hold off on unpacking their bags. Incumbent Tom Flanigan, one-time CIO of the California State Teacher's Retirement System (CalSTRS), departed after less than two months on the job.

Flanigan arrived with great ceremony in October, but his honeymoon lasted only until December 12. Neither State Treasurer Denise Nappier nor her office will elaborate as to whether he left voluntarily or was fired, and what exactly set off his sudden departure. Filling in, for the time being, is Greg Franklin, assistant treasurer for investments.

In a statement, Nappier hinted that style conflicts may have been behind Flanigan’s exit. “His approach to communications and administrative process proved to be inconsistent with my own and I determined that the degree of inconsistency would make a long-term working relationship untenable,” and further that “it therefore seemed best to conclude our relationship sooner rather than later.”

Flanigan has not commented on his departure.

Image Problems

A lengthy history of scandal surrounding the State Treasurer’s office has some observers wondering if there’s perhaps more to the story. Rumors and gossip about just what may have motivated Flanigan’s departure have made the rounds, despite Nappier’s attempts to quiet speculation.

Ironically, Flanigan’s appointment was supposed to repair the battered image of the State Treasurer’s office – not add to the controversy.

Just a year ago, Nappier’s own predecessor, Paul Silvester, pleaded guilty to corruption charges in a bribery and kickback scandal involving illegal finders fees for private equity investments in funds advised by well-connected lobbyists.

In response, the Connecticut Legislature earlier this year passed the Treasury Reform Act – legislation that also created Flanigan’s new position in the state treasury, called Chief Investment Officer.

Lingering Questions

As recently as last month, Nappier herself has come under attack for not completely withdrawing state pension funds from a $140 million private equity investment in Landmark Partners, a Simsbury, CT firm under investigation by the SEC for civil fraud. Landmark’s president is Nappier’s friend and political ally, Francisco Borges, himself a former state treasurer.

In fact, the history of private equity investments by the Connecticut State Pension Fund since 1987 under Borges, and, next, under Silvester, is fraught with questionable deals. These deals have led to investigations by federal authorities, including the FBI, indictments and convictions comprising significant prison sentences for Silvester and his confederates, and, some 21 complaints to the State Ethics Commission.

-Carol Schwefel