UPDATED: SEC Names Raimondo in Pay-to-Play Scheme with Investment Firm Oaktree

Thursday, July 12, 2018


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Governor Gina Raimondo named in SEC action

Oaktree Capital has been hit by the United States Securities and Exchange Commission for violating federal regulations including being involved with a pay-to-play scheme in Rhode Island with then-Rhode Island General Treasurer Gina Raimondo as she was a candidate for Governor in 2014.

Raimondo invested in Oaktree as General Treasurer — the fund earned hundreds of thousands in fees from the state’s retirement fund. And, Oaktree charged one of the highest fees - 1.75 according to a GoLocal review in 2015.

Oaktree has admitted no guilt to the charges as a part of the agreement with the U.S. Security and Exchange Commission, which has fined Oaktree - who paid a civil penalty.

According to the SEC, "Between September 2014 and April 2016, three covered associates of Respondent made campaign contributions to candidates for elected office in California and Rhode Island, which offices had influence over selecting investment advisers for public pension plans in those states. Within two years after these contributions, Respondent provided advisory services for compensation to the public pension plans. By providing those advisory services for compensation within two years after the contributions, Respondent violated Section 206(4) of the Advisers Act and Rule 206(4)-5 thereunder."

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In addition, according to the SEC, “In October 2011, the Employees’ Retirement System of Rhode Island (“ERS”), through the Rhode Island Investment Commission, committed to invest, and subsequently invested, $20 million in Oaktree European Principal Fund III, L.P., a fund advised by Respondent.”

As a part of the agreement between the SEC and Oaktree, “As a result of the conduct described above, Respondent Oaktree Capital willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-5 thereunder, which makes it unlawful for any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under Section 203(b)(3) of the Advisers Act, or that is an exempt reporting adviser, to provide investment advisory services for compensation to a government entity within two years after a contribution to an official of the government entity is made by the investment adviser or any covered associate of the investment adviser.”

Raimondo's campaign spokesman David Ortiz says that then Treasurer Raimondo's campaign flagged the donation and returned in about a month after it was received, "It was refunded in accordance with Raimondo's policy as treasurer to bar the state's investment advisors from making political contributions. In fact, she was the first treasurer to require investment advisors to sign a pledge." The donation was from a Caleb Kramer of Oaktree.

There was a second donation from another Oaktree Capital employee in 2012. It does not appear that the second donation was returned.

This story was first published at 7/11/18 2:37 PM


Related Slideshow: SEC Suit Against Oaktree Capital Management - July 2018


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