Earlier this week, the US Attorney for the District of Maryland accused money manager Nathan Chapman of illegally investing more than $5 million of Maryland’s state pension funds into his own company (See    Feds Charge Chapman With Md. Pension Investment Fraud ).   Chapman, the former chairman of the University System of Maryland’s Board of Regents, was indicted on 39 counts, including securities fraud, conspiracy, and mail fraud.

However, also named in the 61-page indictment was a now-former member of the Maryland pension board, Debra Humphries.   Humphries, a 45-year-old investment adviser, was indicted on a single charge of perjury for allegedly lying to the grand jury about her relationship with Chapman, according to the Baltimore Sun.   Humphries is charged with failing to disclose to a grand jury that Chapman had given her $46,000 in money and gifts during a personal relationship, US Attorney Thomas DiBiagio said, according to the Washington Post.   Humphries resigned from the state pension board 10 days ago.

The charges in the indictment go well beyond Chapman’s handling of the money the state pension board gave him to invest.   Still, given the nearly $5 million the state lost through these schemes, “this is not a case where the defendant’s exposure is a halfway house,” DiBiagio said.

In addition to the $5 million pension investment (See    Bad Investment Could Cost MD Millions ), Chapman also allegedly diverted $437,000 from his eChapman firm and two predecessor firms, both publicly held, starting in 1998. The indictment says the money paid for jewelry, a BMW motorcycle, trips and other gifts and financial support for at least three women with whom he had intimate relations.   One of those women was a company vice president and another was Humphries, who became a state pension trustee in 1997 after Chapman pushed former Maryland Governor Parris Glendening to appoint her to the 14-member board, according to the indictment.

Charge Response

Eileen O’Connor, speaking for Chapman’s defense team, said he was looking forward to his day in court. “These are allegations, and they are not proven,” she said, according to the Washington Post. “Mr. Chapman has been an outstanding member of the community, working with the state to better the educational system and to increase minority businesses.”

Humphries, reached at her home, had no comment for the Post. Earlier this week, she quit as a portfolio manager with Potomac Asset Management in Bethesda, citing personal reasons, a company spokesman said. Joseph Coale, a spokesman for the pension system, said yesterday that Humphries resigned from the board in a June 16 letter that cited “personal reasons.”

State Comptroller William Donald Schaefer, the current board chairman, expressed concern over the damage the indictments might do to the pension system's public stature and surprise over Humphries's alleged involvement. "I never saw any evidence that she was connected to Chapman," he said, though he noted that hers was one of the four votes opposing Chapman's firing in January 2002.   That dismissal came after repeated board discussions of Chapman's disappointing investment performance and increasing worries after the stock allegations became known.

High Profile?

Thursday Schaefer acknowledged to the Post that Chapman might have been treated differently because of his connections and the fact that he was an African American money manager at a time when the retirement system was trying to diversify its investment ranks.   "He had a very high profile," Schaefer said. "I think we were a little cautious about how to handle him."

Chapman's companies earned $6 million in fees during the five years he handled state pension money, according to officials. After pension trustees fired him and withdrew $175 million from his firm, he was forced to liquidate the trust and lay off workers, according to the Post (see    Feds Probe Deeper Into MD Pension Investments ).

Emerging Force

Chapman first gained visibility in Maryland and finance circles in the latter 1980s when he opened The Chapman Co., an investment banking and brokerage firm.   That firm and numerous affiliated ventures over the next decade were aimed specifically at advancing other minority-owned companies and serving the middle- and upper-class minority communities.   Chapman positioned his efforts as a way for corporations and governments to target business specifically to businesses run by African Americans, Hispanics, Asian Americans and women. Chapman termed those sectors "domestic emerging markets," and he even trademarked the term, according to the Post.

In the early 1990s, he handled bond sales for Prince George's County, where he connected with then-county executive Parris Glendening.   After winning the governor's office in 1994, Glendening appointed Chapman to the University System of Maryland's board. Chapman became chairman in 1999, and served in that capacity until last fall.   His appointment to the board continues through 2005, though it is not yet certain what, if any, impact the indictment will have.

It was Chapman, former chairman of the state university system's Board of Regents, who recommended to then-Governor Glendening in 1997 that Humphries be appointed to the pension system's board, the indictment alleges.   Glendening named Humphries that year to a four-year term - she was re-appointed in 2001 - but unknown to other trustees, Humphries and Chapman had an "intimate" personal relationship at the time, according to the Baltimore Sun.   That relationship lasted from 1996 until 1999, according to a separate indictment naming Chapman.   In addition, Humphries allegedly received jewelry, clothing and a trip to Hawaii from Chapman, as well as almost monthly cash payments from March 1998 to June 1999 of $1,100 to $3,311 - for a total of $46,411 over that period, according to the report.

Other Charges

The state securities commissioner simultaneously filed suit in Baltimore Circuit Court seeking restitution for the $25 billion pension fund and other investors, some of them unsuspecting elderly clients.

The Securities and Exchange Commission filed related civil charges Thursday against Chapman, three of his Baltimore companies and three associates, alleging that they backdated stock trades, made unauthorized sales and filed false reports in an effort to rescue the disastrous launch of eChapman Inc., an Internet-focused financial venture that went public in June 2000.

The Maryland retirement system has about 250,000 active and retired members.