In mid-April 2005, when the temperature in Raleigh dipped to 40 degrees, an investments manager with North Carolina's public pension fund headed to Florida for a conference hosted by JPMorgan Chase & Co.

At La Playa Beach & Golf Resort, the two-day conference offered nine hours of meetings and three choices of afternoon activities: golf, a catamaran expedition or a tour of Naples. The investments manager, Susan Carter, signed up for the catamaran.

"Explore beautiful barrier islands and watch dolphins play in their natural habitat," the conference materials advertised. "After an exhilarating sail, you will beach on a nearby barrier island, which offers unsurpassed shelling and exploring on its serene beaches."

The employees who manage the $70 billion North Carolina public pension fund are going to such exotic locations far more often than they did just three years ago, according to a Charlotte Observer analysis. Some trips are at state expense. Others are paid for almost entirely by private firms.

Each trip includes official business, allowing for checking up on Wall Street firms that help invest millions in North Carolina pension money. But on at least a dozen trips, private firms picked up big bills for fancy meals, expensive hotel rooms and lavish entertainment -- standard perks in parts of the financial industry.

Critics say the practice sets up a potential conflict of interest because public pension managers might lose their objectivity when deciding whether to renew a contract with a private firm.

Last week, after questions from the Observer, pension officials changed their policy and said they will seek an official ethics opinion.

The Observer found:

* Since January 2004, 21 employees of the N.C. pension system have taken at least 202 out-of-state trips, mostly for short stays in financial hubs such as New York City, Boston and Chicago. Some trips were to more exotic locations, including five trips to Naples, Fla., since March 2005.

* The pension system's spending on travel has more than tripled in the last five years as it has diversified into more complicated investment vehicles, such as real-estate funds. There were 33 out-of-state trips in 2004, 75 in 2005 and 82 in 2006.

* On at least 12 trips that state employees took beginning in January 2004, private companies offered entertainment or gifts, such as a round of golf, baseball tickets or access to a spa. Companies provided meals and hotel rooms on many more occasions.

Unlike some public pension funds in other states, the N.C. pension system has not had an ethics policy that addresses entertainment and gifts specifically from its outside managers.

Leaders of the system, which reports to State Treasurer Richard Moore, initially defended the perks. In interviews, they said informal settings are helpful for networking and gathering information, eventually leading to higher returns for the pension fund. They also argue that the pension system indirectly pays for travel expenses through the management fees paid to the private firms. Those firms help invest most of the $70 billion fund.

"Every industry has some way to facilitate networking within that industry. It's the way business is done," said Patricia Gerrick, the fund's chief investment officer.

She added about the Naples trip: "It's a business meeting, and part of a business meeting happened to take place on a catamaran ride."

Looking for guidance

Then, on Wednesday and Thursday, the Department of the State Treasurer changed its policy, requiring employees to pay their own way for recreational activities on state business. In a memo, Moore's chief of staff, Stacey Phipps, said she would ask the State Ethics Commission for further guidance.

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