Illinois Pay To Play?

On the one hand, Illinois Treasurer Alexi Giannoulias may have used public funds from the state's college savings fund to pay for a brand new SUV. That's a criminal misuse of public funds, a breach of fiduciary duty, and criminal and civil charges ought to be forthcoming.

On the other hand, Giannoulias claims that the money came from the fee paid to the treasurer's office by an investment firm that manages the fund. That would be considered pay-to-play in many circles, and it raises nearly as many questions as it answers.

In any event, Giannoulias deserves to be thoroughly investigated to determine whether he's engaged in pay-to-play or other civil and criminal misconduct in administering the Illinois college savings plan. (HT: Honorary Youper at LGF)

That's all on top of problems with the fund and a possible breach of fiduciary duties by allowing the fund to invest in riskier securities. It seems that he allowed Oppenheimer Funds to invest in riskier securities, including mortgage backed investments, despite all the risk of being so highly leveraged.

State Treasurer Alexi Giannoulias' office has stopped answering questions about problems in the investment portfolio of the state's $2-billion Bright Start college savings program.

Mr. Giannoulias says his lawyer (Illinois Attorney General Lisa Madigan) has advised him to keep quiet, lest he undermine settlement talks with Bright Start manager Oppenheimer Funds, which he asserts may have violated its fiduciary duty by sticking money in risky mortgage-related securities.

There is some truth in that. The manager who ran Oppenheimer's Core Bond fund left the company earlier this year, and analysts at Chicago's Morningstar Inc. have said the fund was leveraged to the hilt. Ms. Madigan's office has put some limits on public comment.

But Mr. Giannoulias is exaggerating -- perhaps because the questions just keep on arising about whether he properly managed Oppenheimer, or just let it do what it wanted amid a rising number of red flags.

The Bright Star Program lost $85 million last year, and the problems keep mounting for Giannoulias.

The kicker is that Giannoulias is looking to raise funds to campaign for President Obama's former Senate seat. Good luck with that one.

UPDATE:
Lest we forget, this is a name that party instance. Giannoulias is a Democrat.