Janet Cowell & Erskine Bowles: Quid Pro Quo on Facebook fiasco?




After  our recent post on Facebook’s woes potentially impacting the race for North Carolina state treasurer, I got a call from a faithful reader of this site who also happens to be a long-time stockbroker:

“So, Mr. Bowles hosts a fundraiser for Janet Cowell.  Ms. Cowell turns around and — as the sole decision maker for the state retirement fund  — invests a load of taxpayer money in the Facebook IPO.  Mr. Bowles sits on the Facebook board AND is part of the firm underwriting the Facebook IPO.  So, he stands to gain on TWO fronts.

According to media reports, North Carolina’s taxpayers and state government employees lost over $4 million on the Facebook deal.  It’s pretty clear, when you look at the details of this deal, that some politically-connected people made some big money on this deal at the expense of North Carolina’s taxpayers.  This stinks to high heaven.”

My source tells me that — as the underwriter — Mr. Bowles’ firm was entitled to a concession (similar to a commission) on the deal to the tune of 1 to 2 percent.  Facebook was initially offered at a share price of $38.

My source guess-timates that, based on the $4 million loss, Cowell bought in the neighborhood of 250,000 to 500,000 shares of Facebook stock.  The source says the concession paid to Bowles’s firm was likely in the neighborhood of 25 cents to 76 cents per share.

So, if Cowell bought 500,000 shares of Facebook, and Bowles’s firm got 50 cents per share — that’s a $250,000 payday to a man who hosted a fundraiser for Cowell, the state of North Carolina’s chief investment officer.  My source says it would be interesting to know how much Bowles raised for Cowell, and exactly how many shares of the dubiously-valued Facebook stock  Cowell turned around and bought with OUR MONEY:

“Oh yeah, I’d host a fundraiser for you if I knew it was going to mean a quarter million going into my pocket a little bit down the road.  I might kiss you and buy you dinner, too.”

My source said the previously mentioned concession was just for the FRONT END of the deal — the purchase.  The source said Bowles and his firm stood to make EVEN MORE MONEY on the SALE of the stock:

“The sad thing about this story is this:  the political elite that run things in Raleigh are making out like bandits at the expense of the taxpayers.  This disaster of an investment is going to cause a shortfall in the state employees retirement fund that you and I and the rest of the state’s taxpayers are going to have to cover.

Where are the state auditor and the secretary of state on this?  Elaine Marshall is in charge of looking into stuff like this.  If I tried something like what it appears Ms. Cowell has perpetrated, I’d be in SO much legal hot water.

Most all of us in this business recognized Facebook’s IPO as a stinker from the very beginning.  From what we know about this deal, it is easy to draw one of two conclusions: (A) Janet Cowell is incompetent, or (B) she’s corrupt.  Both of those scenarios are bad news for the people of North Carolina.”