Moore, Cooper vie over lawsuit

N.C. pension fund investments lost

With $18 million in lost state pension fund investments hanging in the balance, State Treasurer Richard Moore and Attorney General Roy Cooper are battling over who should represent government workers and retirees in a class action securities fraud lawsuit against Freddie Mac.

Freddie Mac, the federal government-backed mortgage company, is a central figure in the stock market meltdown and was recently taken over by the federal government. The lawsuit alleges that Freddie Mac concealed and misrepresented to investors the company's poor financial practices, which led to huge losses. It also alleges that Freddie Mac failed to have enough assets to protect itself against a downturn in housing prices.

Moore, a Granville County Democrat, has hired two law firms now seeking to convince a federal judge that the North Carolina Retirement Systems should be the lead plaintiff in the case.

One of those firms, SZD Wicker, includes former Lt. Gov. Dennis Wicker, who was a big backer of Moore's failed gubernatorial campaign and has benefited handsomely in legal work from the treasurer. Wicker, his family and members of the law firm have contributed roughly $20,000 to Moore's campaign. Wicker could not be reached for comment.

Last week, Cooper's chief deputy attorney general, Grayson Kelley, wrote a brusque letter to the treasurer's lead attorney, William Narwold, who works for the firm Motley Rice of Mount Pleasant, S.C. Kelley's letter said Moore's office "has no legal authority" to hire lawyers to represent the state.

Kelley cited state law that requires state agencies to get the approval for such hires from the governor, upon advisement of the attorney general. He also said that his office will contact the federal judge if Narwold does not back out of the lawsuit.

Moore could not be reached for comment, and his spokeswoman, Sara Lang, made no one else in his office available for an interview. Moore's term as treasurer ends in January.

Lang provided a copy of a response Narwold wrote to Kelley on Wednesday asserting that Moore had the authority under state law to hire attorneys "necessary for the proper administration of investment programs."

Kelley had copied his letter to law firms representing other investors in the class action suit, a move Narwold said "directly jeopardizes the ability of the Treasurer to protect the state employees' retirement funds and to recover the significant losses."

Narwold also said the attorney general had never raised any objections to the treasurer's participation in previous class action lawsuits that have recovered more than $37 million for the state employees' retirement funds since 2005. The pension funds serve 820,000 current and retired state and local government employees, including teachers and firefighters.

Cooper could not be reached for comment. A spokeswoman, Noelle Talley, said his office found out about the legal action from a third party. Talley said that Cooper's staff has been trying for the past few years to get Moore's office to use a competitive process to award legal work.

Lang, Moore's spokeswoman, declined to say how Motley Rice and SZD Wicker earned the legal work. She said they are being paid on a contingency basis.

She said SZD Wicker is needed to "facilitate information gathering and to ensure that the interests of the pension fund are always protected."

She said that Wicker's help to Moore's campaign played no role in the decision to hire Wicker's firm. Another firm that previously had Wicker as a partner received more than $1 million in legal fees for serving as bond counsel to Moore's office.

Millions lost

Court records filed by Narwold show that the retirement systems had invested a total of $20.1 million in Freddie Mac securities during the period of the class action suit -- Nov. 21, 2007, through Aug. 5. Of that, less than $2 million remains. Freddie Mac officials could not be reached.

Ed Regan, executive director of the N.C. Retired Governmental Employees' Association, had one word to characterize the loss: "Wow."

He supported Moore's efforts to recover the money, but said the attorney general should have a say, too.

"If indeed there is evidence of wrongdoing, misleading information, etcetera, that led to some of these losses, then the investors have every right to bring suit against them, and I would hope that the attorney general and the governor would approve this action by Treasurer Moore," Regan said.