The South Carolina Retirement System Investment Commission has filed a lawsuit against state treasurer Curtis Loftis for refusing to sign a capital call to Warburg Pincus.
Loftis and the other members of the $26.6 billion retirement fund’s investment commission voted to approve a commitment of up to $50 million to Warburg Pincus in November. Upon approving the commitment, the treasurer requested that the commission provide a signed legal document stating the terms of the investment, including investment fees and the length of the contract. Because the investment commission has not produced the document, Loftis claims, he has refused to authorize the capital call. The Associated Press reported the size of the capital call to be $11.7 million.
“I will not send $50 million of retiree money anywhere until the commission provides basic custody information, including a signed statement and legal documents,” Loftis said in a statement. “The commission lacks a moral code and their actions prove it. This is not Monopoly money and the safety of public funds comes first.”
The retirement system has until 16 April to fund the capital call or default on its commitment. Depending on the terms of the limited partner agreement, if South Carolina does default, Warburg Pincus may be able to dilute the retirement system’s existing position in the fund and ask other limited partners to contribute the missing capital.
“In general, you basically look to get the money from another source, very often the other LPs,” Joel Greenberg, senior corporate partner at law firm Kaye Scholer, told Private Equity International. “I’ve seen mechanisms where you can treat the amount as a loan to defaulting partner at pretty high interest.”
The dispute between Loftis and the investment commission is the most recent in a long feud between the treasurer and his fellow commissioners. In February, the commission voted to censure the treasurer for a series of critical public statements the treasurer made about the commission’s investment practices dating back to 2009.
Among Loftis’ criticisms of the investment commission are claims that the retirement fund performs poorly relative to other state pensions, pays too much in fees and has a portfolio that is too complex.
Warburg Pincus declined to comment.