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"In 1993," they added, "the Fund, which at the time had assets of $56 billion, did not actively seek or encourage minority firms to bid on retirement Fund business. In fact, only a diminutive level of transactions was performed by the Fund with minority firms." But all that, the executives explained, "changed drastically" after McCall gained control of the Fund, which is valued at $130 billion today. How has McCall shared this financial pie with minority firms? The executives asked Simmons to consider that:
McCall, in partnership with Fairview Capital, created the Black Enterprise Fund.
Hamilton Lane, a minority-owned firm, has extensive dealings with the Pension Fund, including the management of a $400 million "fund of funds."
Brown Capital, another minority-owned firm, manages a direct-equity account valued at more than $250 million.
McCall, the executives maintained, steadfastly encouraged minority-owned firms to bid for brokerage business. "He set goals for the Fund's minority business," they insisted. "Today, fully 25 percent of the Common Retirement Fund's brokerage business is with minority firms." In addition, McCall tapped "numerous" minority firms for contracts involving asset management and private equity deals.
"As one example, the Fund has utilized minority firms to provide services for real estate owned by the Fund," the executives said. "[McCall] has contracted with minority law firms for legal work in connection with the Fund. Even when dealing with non-minority-owned firms, Carl has encouraged those firms to assign minority employees to work with the Fund. He has also made tens of millions of dollars worth of loans to minority- and women-owned businesses through the New York Business Development Corporation."
The executives portrayed Simmons as misinformed, and blasted him for claiming that "in his job as State Comptroller, [McCall] didn't change anything" when it came to integrating the mostly white staff in his office. "Carl McCall has changed the management culture of the Common Retirement Fund, not only by enabling African-American firms to do business with the Fund on a competitive basis, but also by hiring a more diverse workforce," they said.
After eight years of working closely with McCall, the black executives have seen their businesses flourish. "The business dealings we have entered into with the Common Retirement Fund have led to other opportunities on Wall Street," they said. "Carl McCall has been an extraordinary leader, committed to giving all qualified firms the opportunity to do business with one of the largest pension funds in America." They ended their letter by urging Simmons "to do a little research before you dismiss the accomplishments of someone like Carl McCall."
In response, the rap mogul lashed out at McCall directly, declaring in an April 12 letter to the comptroller that only two of the 13 executives had signed the letter extolling their relationships with him. "I couldn't help but notice the absence of John Utendahl's signature," Simmons said. "When you visited my office, you described Utendahl Capital Partners as being one of your largest and most significant minority relationships on Wall Street."
Simmons apparently assumed that McCall encouraged the executives to write to himand he blamed the comptroller for ducking his original complaint. "My comments specifically addressed assets under management as opposed to the brokerage relationships that you focused on," he argued. "Your letter mentions that '25 percent of the Common Retirement Fund's brokerage business is with minority firms,' which is commendable. However, dollars provided to asset managers are equally, if not more, important to minority firms in the financial services because it's a viable way for our people to control our own destiny as we create. . . long-term institutions."
Simmons contended that after McCall took over as comptroller he did not see any significant changes in the way the comptroller's office dealt with minority firms clamoring to do business with the state. "Based upon your 1999 annual report, the New York State Common Fund has placed less than 1 percent of its total assets with minority managers," he said. "Additionally, very few of these minority firms are based in New York. This is not the kind of change that I would describe as being 'drastic' or particularly effectual within the minority community."
He challenged McCall to make plain what the executives meant when they described his remarks on NY1 as inaccurate. "My facts and figures are focused specifically on firms that are minority-owned or controlled, rather than firms such as Progress and Alliance Capital which never have been, or no longer are, minority-owned or controlled," Simmons emphasized. He seized on an alleged discrepancy in the claim by the executives that they had been discriminated against by McCall's predecessors. "Carl, it is difficult for me to comprehend how your administration could even begin to have a major impact on minorities in financial services when most of your senior staff members, such as John Hull, the chief investment officer, are holdovers from the previous administration, when little to no business was done with minority firms."
One of Carl McCall's supporters who examined Russell Simmons's letter reiterated that it appeared to be a warning to McCall to bow out to avoid a divisive Democratic primary. "The people who wrote Russell's letter will dredge up every contract that Carl has negotiated with the minority firms," the supporter predicted. "But Russell knows better: In 2002, he will not get away with what he got away with in 2001."
Research assistance: Sarah Park