Christie ally steps down as head of Investment Council

An ally of Gov. Christie announced his resignation Wednesday as chairman of the State Investment Council.

Robert E. Grady, a private-equity firm director who served in President George H.W. Bush's administration, said during the council's meeting Wednesday that he needed time to deal with an illness in his family, officials said.

The council oversees the state's pension funds, which have about $80 billion invested.

Grady also said during the meeting that he had stayed longer than he intended, wanting to oversee a leadership change in the investment division of the state Treasury Department, officials said.

Vice Chairman Tom Byrne will take over Grady's duties. The council will likely discuss a permanent replacement during its next meeting in January, a Treasury spokesman said.

Grady, who lives in Wyoming, participated in Wednesday's meeting by phone.

He commuted to past meetings but did not bill the state for his travel expenses, officials said. He received no salary.

Under Grady, New Jersey has invested more heavily in hedge funds and other "alternative investment" funds. Treasury officials have said the increase is not unusual compared with other states.

Generally, the hedge fund results have trailed those from U.S. stock investments. The funds pay managers much higher fees than what the state pays to invest in U.S. stocks.

The state has invested in some funds run by people who have made political donations, including to the Republican Governors Association, which Christie led this past year.

Earlier this year, Treasury officials said they would audit the state's $15 million investment in a venture-capital firm after questions were raised about a donation to New Jersey's Republican State Committee by Charlie Baker, the newly elected governor of Massachusetts, who was linked to the firm.

The state has since sold its share in the firm, General Catalyst. The audit is underway, Treasury spokesman Chris Santarelli said Wednesday.

In September, the state AFL-CIO filed a complaint with the state Ethics Commission, citing a list of donations the union alleged had benefited Christie by firms or people connected to firms with contracts with the state.

The union alleged that Grady had violated state Division of Investment rules "barring politics in the selection and retention" of funds and investments "and has further created an appearance of impropriety."

Susana Guerrero, executive director of the Ethics Commission, said Wednesday that she could not comment on the status of a complaint or say whether an investigation was underway.

A Treasury spokesman said investment management decisions for the state pension fund are made by Division of Investment employees. Managers are not selected by the state Investment Council, he said.

Asked at a September news conference if there was an appearance of a conflict of interest on the State Investment Council, given Grady's political background, Christie said no. He said Grady had been cleared by Treasury's ethics office.

"I have never once had a conversation with anyone in the Department of Treasury or any member of the Investment Council, including Mr. Grady, about what they do over there," Christie said. "Gov. Corzine was very involved in that, as you know. I think it's inappropriate for the governor to be involved."

Christie called Grady a friend of 40 years but said Grady gave him political advice, not views on investments.

Grady helped coordinate Christie's trade mission to Mexico in September and was part of the delegation that accompanied the governor.

In a statement Wednesday, state Treasurer Andrew Sidamon-Eristoff said Grady's record as chairman "speaks for itself," citing $36 billion in investment gains achieved by the pension fund in the last four fiscal years, increasing the fund's market value by more than $13 billion as it distributed $34 billion to beneficiaries.

"The robust performance of the Division of Investment over the last four years and the professionalism exhibited by the State Investment Council during Chairman Grady's tenure are a testament to Bob's character, dedication, and wide range of skills," Sidamon-Eristoff said. The director of the Division of Investment, Christopher McDonough, said in a statement that under Grady, there "has been a focus on making decisions based solely on the merits," leading to positive results.