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Ex-pension chief declines to testify

Appearing before Senate committee, invokes right

By Michael Kranish
Globe Staff / May 21, 2009
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WASHINGTON - Charles E. F. Millard, who until January ran the federal agency that insures the private pension plans of 44 million Americans, yesterday refused to testify before a Senate panel that is investigating his role in the awarding of contracts under which the Pension Benefit Guaranty Corp.'s insurance fund was being shifted into riskier investments.

Millard invoked his Fifth Amendment right against self-incrimination as the agency reported that its deficit had tripled in the last six months to $33 billion, even as it faces the prospect of taking over pension plans of automakers and other troubled companies. The increased deficit was due to a combination of factors, including $3 billion in investment losses during the recent stock market crash and a variety of obligations.

Senator Herb Kohl, Democrat of Wisconsin and chairman of the Senate Special Committee on Aging, told a packed hearing room that he has "grave concerns" about the viability of the pension agency, raising the prospect that it might have to be bailed out by taxpayers.

The agency's acting director, Vincent Snowbarger, said there are enough assets in the insurance fund to pay current obligations, but he agreed that "over the long term, the deficit must be addressed."

Millard pushed through a strategy in February 2008 that shifted the $64 billion insurance fund from having 15 to 25 percent of its assets in stocks, to one that would put 55 percent into a riskier combination that included foreign stocks, private equity funds, and real estate. The remainder was to remain invested in bonds.

Millard has said that he believed the strategy would pay off over the long term and help the agency forestall, if not prevent, the need for a taxpayer bailout. The strategy was unanimously approved by a three-person board composed of Cabinet secretaries, but it was strongly opposed by a number of outside specialists who said it was far too risky.

The agency's inspector general, Rebecca Anne Batts, testified at the hearing that Millard had engaged in "serious misconduct" by involving himself in the awarding of contracts to Wall Street firms that would implement the new strategy.

Batts said that Millard played a role in developing the criteria that eliminated certain firms from contention for the contracts, and enabling other firms to get them. The contracts were awarded to Goldman Sachs, BlackRock, and J.P. Morgan. In her report, Batts said that Millard discussed job prospects on Wall Street with a Goldman Sachs official.

Millard left the agency on the last day of the Bush administration, Jan. 20. President Obama has not nominated a replacement.

Millard's actions are under investigation by several committees, some of which are examining whether he improperly tried to get help from the Wall Street firm in obtaining a private-sector job. He has denied wrongdoing.

Yesterday, a bipartisan group of six senior US senators sent a letter to Attorney General Eric Holder seeking a "thorough and independent review" of Millard's actions.

The pension agency, meanwhile, is considering whether to terminate the contracts, and it has slowed or halted various parts of the investment strategy while the matter is under review, agency officials said.