Townsend backs off investment plan

Thursday, Sept. 19, 2002 | 9:45 a.m.

CARSON CITY -- After being hit with sharp criticism, Sen. Randolph Townsend, R-Reno, is retreating from his plan to try to persuade the state Public Employees Retirement System to invest $200 million in emerging businesses in Nevada to diversify the state's economy.

Secretary of State Dean Heller, who has been the major critic of Townsend's proposal, said the senator made a wise decision to back out of the proposal.

"If this is such a good deal, why doesn't Townsend use the legislative pension fund" to finance the companies, Heller said.

In a news release, Townsend said: "Due to the reaction of this single element of my proposal has received in the media and from a couple of Nevada officials who either do not understand it, or choose to ignore it, I am setting it aside for further review so that it can be studied and eventually better understood."

He said he had no intention of recommending to Gov. Kenny Guinn or to the Legislature "any new uses of PERS funds unless or until everyone can agree that it is a useful tool in our efforts to recruit new business to Nevada."

Heller responded, "It's my experience you don't back off something that is a good proposal."

Townsend first complained the $13 billion retirement system employed a California management company and had given it $200 million to invest. He said the firm, Pathway Capital Management LLC of Irvine, Calif., invested the money in California and East Coast firms but not in Nevada.

But retirement system officials said Pathway has invested $12 million in start-up and other companies in Nevada.

Townsend said he wanted to encourage the board of directors of the retirement system to "consider investing in successful Nevada companies at a time when we as a state need to send a message of investor confidence to financial communities."

In his statement Wednesday, Townsend said he wanted to free up money to diversify the economy.

"At no time have I wanted to invade or gamble with PERS funds to invest in 'risky' or otherwise non-secure investments," he said. "That would be unthinkable."

Heller initially suggested the 20-year senator could face an ethics problem if he continued pushing legislation to invest the pension funds in Nevada companies.

Heller raised the conflict-of-interest issue by noting that Townsend is a co-owner of Northstar Investors in Reno. Some of his partners own Millennium Ventures, now called Nevada Ventures, in the same office and with the same telephone number as his company.

Nevada Ventures lost out in its bid to be chosen by the retirement board to manage part of the PERS portfolio.

Townsend said Wednesday: "I have no profit motive in this plan or any budget plan that is currently under consideration -- to suggest that I do demonstrates a total lack of understanding of my proposal and is merely reckless political rhetoric."

Heller replied, "Methinks he protests too much."

Others who joined in criticizing Townsend were Assemblywoman Marcia deBraga, D-Fallon, and Sen. Joe Neal, D-North Las Vegas, the Democratic nominee for governor.

The assemblywoman and Heller were co-chairs of the Nevadans for Pension Protection Coalition, which pushed through a constitutional amendment to protect the fund, which has a membership of 100,000 of state and local government employees and schoolteachers.

Meanwhile, state employee groups and labor unions were planning to stage a protest at noon today at the Grant Sawyer Building against Lt. Gov. Lorraine Hunt, who they say supported the Townsend plan.

"We owe it to our state's workers retired and active to clearly send a message that raiding the retirement fund of hard-working Nevadans is never acceptable," said Danny Thompson of the Nevada State AFL-CIO.

Steve Forsythe, political consultant for Hunt, said the lieutenant governor "never came out and supported the Townsend plan." He said she never has backed taking money out of the retirement system.

When Townsend disclosed his plan, Forsythe said, Hunt was excited about a new idea to stimulate economic diversification, but she believes it should be done with private capital.

Forsythe said the protest was an effort by the unions to create an issue for Clark County Commissioner Erin Kenny, Hunt's Democratic challenger. Kenny has been endorsed by the unions.