ND Legacy Fund: Who is in control? Part I

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North Dakota’s Legacy Fund has been called the “people’s fund.” It’s filled with our tax dollars, over 8 billion dollars’ worth, but those tax dollars are flowing into investments out of North Dakota and out of our country.

It is governed by North Dakota’s State Investment Board, or SIB, and advised by consultant firm Callan which has no offices in North Dakota.  Through monthly taxes on the state’s oil production and returns on investments, the Legacy Fund has been growing for more than eleven years.

And taxpayers are weighing in. In a statewide survey conducted by WPA Intelligence, a leading national research firm, taxpayers, by a 10 to 1 margin, want a greater portion of the legacy fund invested in North Dakota.

And by an 8 to 1 margin, they want North Dakota advisors to decide how to invest the money, not out-of-state or Wall Street consultants. ​

Overwhelming support by the legislature ​for a bill aimed at reinvesting in the state shows that most lawmakers agree North Dakota would be better served if more legacy fund monies were put to use in our own state for such things as economic development.

In Part I of this series, we explore to what degree is the will of the public and legislature is being factored in how the fund is being invested? And, if that’s open to debate then who’s in control?

In July of 2020 Fargo Forum Investigative Reporter Patrick Springer ​published an article outlining Legacy Fund investments in foreign entities. It got prominent Fargo attorney Luke Heck’s attention.

“It prompted me to do a freedom of information act request, or open records request to the State Investment Board,” said Heck.

Heck got back a spreadsheet from the State Investment Board showing all of the Legacy Fund’s investments during fiscal year 2019/2020.​

“At the pure volume and scope of the investments that we have out-of-state and out of the country, and some of the shady locations that we are invested in, in businesses and government entities across the globe,” explained Heck.

66 pages of fine print showing foreign investments spanning 89 countries. 37 different Chinese investments alone, most of which are linked to the Chinese Communist Party (CCP).

One investment that stood out to Heck: $12 million investment into Tencent, the Chinese company that makes the social media app WeChat. ​

“What’s relevant about that is that application was used or assisted in the Chinese government tracking the Uyghur Muslim ethnic minority population in China, and for those who aren’t aware, the Uyghur population has been for lack of a better term basically abducted and transported to concentration camps and being housed and forced into hard labor. And, so in essence, the state’s funds are getting used to invest in a company that’s assisting the Chinese communist government in basically committing potential genocide,” explained Heck.

In addition to China, the SIB documents show that Legacy Fund dollars are invested in Russia, Venezuela, Saudi Arabia, and other government entities and companies that in countries that are on the Human Rights Watch List. ​

Not only is much of the legacy fund principal invested out our country’s border, it’s essentially invested everywhere but North Dakota. Just ask North Dakota Bankers Association President Rick Clayburgh.

“There’s literally billions of dollars, North Dakota dollars, that are invested outside of the state of ND. Why couldn’t a portion of those dollars be put under management here in ND with banks that have trust powers?” remarked Clayburgh.

Clayburgh says he has been working with legislators since 2012 to try and get some of the Legacy Fund monies managed by North Dakota banks with trust powers.

“Our banks never really got the opportunity to ever put in a bid to manage any of the dollars. And, that’s one of the frustrations we had. We really appreciate what the legislature did with the governor signing 1425,” explained Clayburgh.

In written testimony for House Bill 1425, Heck asked the State Investment Board to consider the benefits of investing the Legacy Fund’s principal locally before investing out-of-state or out-of-country. ​”Instead of considering the merits of investing in-state,” Heck wrote, quote: “the board has engaged 32 Wall Street money management firms to invest our principal anywhere but within North Dakota.”

Last summer North Dakota Insurance Commissioner John Godfread brought forward the proposal to the State Investment Board, which oversees the Legacy Fund investments,  to reinvest 10% of the Legacy Fund back into the state.  ​Godfread’s plan didn’t even get a vote from the board. That’s when Godfread teamed up with Representative Mike Nathe to turn his proposal into House Bill 1425. The campaign for the bill shed light on the Legacy Fund’s foreign investments. It got a great amount of attention in the legislature, and HB 1425 gained overwhelming support with the House voting 85-8 and in the Senate 47-0. ​

“They saw the public support for the bill. They saw the support in the legislature for the bill and they tried to get out ahead of this thing,” explained Representative Mike Nathe.

Here’s the hitch: Representative Nathe says while HB 1425 was gaining momentum in the legislature, the State Investment Board established their own in-state investment program knowing that the legislature had broad support for in-state investing. ​

SIB minutes, memos and documents obtained by KX News shows that during the legislative campaign for HB 1425, between late Sept and Late October, the State Investment Board created their own in-state investment program. ​

SIB asked out-of-state investment firm Callan to search for money managers for the in-state investment program. ahead of HB 1425. Callan brought four firms forward, none from inside the state, and SIB picked Chicago firm, 50 South Capital, once again frustrating in-state banks.

“The actions taken by the advisory board and by RIO and those involved as far as naming Callan and 50 South, you’re right. They were trying to get ahead of the game, so they came up with their own in-state investment program all while this bill is going through the legislative process,” explained Nathe.

Join us Sunday on KX News at 10 for a deeper look into the power struggle behind North Dakota’s Legacy Fund.

We reached out to Callan for comment on this story, and they responded with a letter, but requested KX news keep all content confidential.

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