ND Legacy Fund: Who is in control? Part II

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$8 billion dollars, it’s an enormous sum sitting in the North Dakota Legacy Fund. Those controlling the investment of the 8 billion dollars, a small group of twelve.

The State Investment Board (SIB) is made up of high-ranking state officials like the Lt. Governor, the State
Treasurer, the Director of Workforce Safety and Insurance, and other appointed members. The SIB is advised by Callan, an out-of-state firm, who’s worked with the state for decades.

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. 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.

In Part I, KX News looked at how an investigation of the Legacy Fund’s foreign investments for fiscal year 2019/2020 helped sway the public and legislature to support an in-state investment program through
House Bill 1425.

For Part II we ask: has the State Investment Board gotten out of any of those controversial foreign investments for the 2020/2021 fiscal year?

Representative Keith Kempenich is Chairman of the Legacy and Budget Stabilization Fund Advisory
Board.

KX News Anchor Josh Meny sat down with Kempinich to ask him questions about the Legacy Fund’s foreign investments, “What is the State Investment Board doing about not investing in accounts that are
connected to Alibaba, which was banned in the United States by the Trump Administration, and
investments that are linked to the Chinese communist party and the Russian Government?”


“Well, like I said yeah. Alibaba, Wahoo was another, you know and we weren’t in any of those, so I can tell you that right now,” responded Kempenich.

However, fiscal year 2019/2020 documents show Alibaba was the largest foreign holding in the Legacy
Fund and the eighth largest fund holding overall. SIB invested nearly $15 million dollars in this one
Chinese company alone.

KX News filed a Freedom of Information Act request to the State Investment Board for this year’s fiscal
year 2020/21 report, which shows that North Dakota’s Legacy Fund is invested in Alibaba even more at nearly $20 million dollars.

“Did you know that the Legacy Fund, North Dakota people’s fund was invested into accounts linked to the Chinese communist party and even linked to an account that facilitates the oppression of the Uhyger people in China?”

“No, and see that was one of the things that like I said we don’t get into those details when we’re, and truthfully I’m guessing that we probably don’t have much in China right now and stuff on that,” replied Kempenich.

Documents again show the contrary. In fiscal year 2019/2020 foreign investments show that $12
million was invested into Tencent, the Chinese company that makes the social media app WeChat. International headlines show the app was used as a tool by the Chinese Communist Party to surveil and
suppress the Uyghur minority group in China.

For this fiscal year, 2020/21, SIB more than doubled down on their investment into Tencent at
nearly $26 million dollars.

The Legacy Fund also has nearly $1 million invested in the China National Offshore Oil Corporation
(CNOOC), a competitor to North Dakota’s oil and gas industry.

“The companies in question that were kinda brought to light, you know last year, that are
kinda on a watch list and stuff, we weren’t invested in,” said Kempenich.

Again, the 2019-20 documents show investments in several countries on the Human Rights Watch List.

In addition to China, they include Russia, Venezuela, Saudi Arabia, Sri Lanka, Ghana, Serbia, Croatia,
Columbia, Morocco, Nigeria, and others. North Dakota’s Legacy Fund Remains invested in those countries today.

Representative Bernie Satrom was an early proponent of getting the Legacy Fund invested in North
Dakota.

“I had lunch with a fellow who is in the military recently and I said what would you think
about the idea of investing North Dakota funds in Russia or China, it was interesting he wasn’t looking at
it from a financial standpoint, but from a military standpoint, that sounds a lot like aiding and
abetting,” said Satrom.

Satrom helped spread awareness of the scope of the foreign investments as a way to gain momentum
for House Bill 1425.

“So what if we make a lot of money with some Chinese company that’s ripping people off
and doing the wrong thing, I don’t think any North Dakotans would stand for that, and I think as
legislators you’re going to be hearing a lot more in the next session and the days to come,” explained Satrom.

As we explained in Part I, the State Investment Board created its own in-state investment program.
SIB chose one of the firms recommended by Callan, 50 South Capital, which is also located out-of-state,
to manage 3% of the equity portion of House Bill 1425 that will streamline the process for in-state investing.

Representative Mike Nathe spearheaded House Bill 1425 and told KX News that the SIB was quote: trying to get ahead of the game” when they named 50 South Capital the money manager for the in-state investment program.

“The first three percent has already been spoken for already by Callan and 50 South, so now
we have seven percent and that is sitting out there to this day. The advisory board has not taken any
actions at all to come up with a process, an application, any place to address that seven percent,” explained Representative Mike Nathe.

With the Special Session starting on November 8th, Representative Nathe confirms he is moving
to write new language in House Bill 1425 that would be voted on by the legislature during the
Special Session.

In Part III, KX News will examine the process in which Callan recommends money managers.

KX News has reached out to Callan for comment on this story, they responded with a letter but requested all content be kept confidential.


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