Moore was prepared to hire Crow's Dallas-based investment firm to manage up to $100 million in state pension dollars, but first he wanted to meet the chief executive. The chat went well, and Crow Holdings got the investment.

Less than a year later, Crow and six others tied to the firm gave $28,000 to Moore's political campaign on the same day.

To critics, that's a conflict of interest. For Moore, it's not unusual. About half of the companies that manage money for the $70 billion-plus pension fund have employed people who have contributed to Moore's political campaigns, according to an Observer investigation.

State officials in North Carolina and elsewhere often take contributions from business people that do work for the state. But the actions of state treasurers have long raised special concern because of the billions of dollars in retirement money they oversee. Critics say that could open the door to a "pay-to-play" arrangement in which investment decisions are influenced by political considerations.

Bob Hall, research director for watchdog Democracy North Carolina, said even the appearance of a conflict is bad.

"It's a rotten system," Hall said. "Even when politicians do the right thing, the public is going to second-guess them when they see so much money from special-interest groups or donors that are doing business with the agency."

In North Carolina, the potential for a conflict of interest is particularly acute because of an unusual system in which the state treasurer has sole responsibility for running the pension fund. Moore has a staff that advises him, but he is ultimately in charge of all investment decisions.

Only four states have this kind of so-called sole fiduciary setup, and lawmakers here said they're not looking to change it.

The issue is important because the pension fund covers 700,000 retired and working teachers, state and local government employees and others in the public sector. Workers put money in the fund from their paychecks, and so do the governments that employ them. More money comes from investment returns.

Pay-to-play is a hot topic in North Carolina. This month, former House Speaker Jim Black, a Democrat, admitted taking illegal payments from chiropractors who wanted legislation from the General Assembly. Black also received thousands in legal contributions.

No one has accused Moore of breaking any laws.

The fund has done relatively well with a 7.23 percent return last fiscal year, and it is one of the few in the country that is fully stocked to make all of its future payouts.

Taking contributions from firms the pension fund does business with, however, contrasts with his high-profile efforts to police conflicts of interest on Wall Street and to improve business practices in corporate America.

A Democrat and likely candidate for governor in 2008, he says it would be "incredibly shortsighted" to make any investment decisions that weren't in the interest of beneficiaries. He says the pension system has performed well in North Carolina because there is "clear accountability."

Asked whether he should be taking contributions from investment managers, Moore said he's working within the current rules. The only fair change, he said, would be to bar the treasurer and any challengers from taking the donations.

Opponents say the practice needs to be stopped.

"This is an old problem the [U.S. Securities and Exchange Commission] should have solved years ago," said Mercer Bullard, a law professor at the University of Mississippi and longtime critic of the practice. Elected officials in charge of pension systems "have an extra incentive to invest with those who make contributions."

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