- The Washington Times - Tuesday, June 24, 2003

BALTIMORE (AP) — Federal prosecutors have widened their probe of the state’s pension system to include for the first time a member of the board of trustees.

Prosecutors investigating the dealings of investment executive Nathan A. Chapman Jr. also are seeking information about trustee Debra B. Humphries, who was appointed to the board by former Gov. Parris N. Glendening.

Subpoenas obtained by the Baltimore Sun reveal prosecutors’ interest in Miss Humphries, the newspaper reported yesterday.

Mr. Chapman invested money for the pension fund from 1996 until he was fired in January of last year. Mr. Chapman, a political ally of Mr. Glendening’s, also resigned last year as chairman of the state university system’s Board of Regents, although he continues as a member.

Mr. Chapman was fired after trustees learned the Securities and Exchange Commission was looking into the investment of pension funds by a manager, supervised by Mr. Chapman, into companies Mr. Chapman controlled. When the investments were reported to the trustees, Miss Humphries was among those who opposed the successful motion to fire Mr. Chapman immediately.

Miss Humphries, 45, is a senior fixed-income manager at Potomac Asset Management, according to the Bethesda-based company’s Web site. The Bowie resident has been a trustee since 1997.

Mr. Chapman’s investment firm — Chapman Capital Management — managed about $175 million of the state’s $27 billion in assets. Mr. Chapman was hired to find minority-run investment firms for the state pension system. Among those he chose was Alan Bond, who is black.

Mr. Bond, who purchased much of the Chapman stock for the pension system, has since been sentenced in New York to 12 years for unrelated investment fraud.

Miss Humphries’ connection to the investigation is not clear from the subpoenas or other materials sought by prosecutors.

One subpoena, dated Feb. 13, asked for copies of financial disclosure forms and any correspondence to, or from, Miss Humphries regarding such forms. Other members of the 14-member board of trustees were not mentioned in the subpoenas.

The second subpoena, dated April 30, shows the probe is ongoing and Mr. Chapman remains of interest to prosecutors. The subpoena asks for copies of any letters showing when quarterly reports for several Chapman-related companies were received by the pension system staff. The subpoena also sought quarterly reports of other money managers that have not been tied to the investigation.

U.S. Attorney Thomas M. DiBiagio has been investigating Mr. Chapman’s dealings with the state pension system since at least last summer. Mr. DiBiagio’s office refused to comment Monday on the probe.

The Washington law firm Patton Boggs LLP said Monday that it has been retained to represent Mr. Chapman in the criminal investigation in Maryland and any related regulatory proceedings.

The firm said that the lead attorney on the case is Lanny Davis, a Democratic activist and former legal adviser to President Clinton, and that the firm would have no further comment “at this time.”

Miss Humphries has been one of the strongest advocates of entrusting more money to minority-owned companies such as Mr. Chapman’s. She serves on the board’s Investment Committee and is chairman of a subcommittee on minority investments.

Her financial disclosures for 1998-2001 show that she had no investments, debts or real estate holdings that would require disclosure. The only information she has disclosed has been her place of employment.

Miss Humphries’ 2002 disclosure was supposed to be filed April 30 of this year but is late, according to Suzanne Fox, executive director of the State Ethics Commission.

One of the two subpoenas asks for any materials provided to board members about their financial disclosure obligations and other duties, which could be relevant if prosecutors were probing whether a trustee failed to follow those rules.

The pension system is responsible for the pensions of more than 250,000 teachers, police officers and other active and retired government workers.

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