- The Washington Times - Sunday, February 10, 2002

BALTIMORE (AP) The state pension board has cut its ties with a Baltimore investment firm that manages about $175 million in state funds.
Board members learned that Chapman Capital Management is under investigation by the federal Securities and Exchange Commission. Its chief executive, Nathan Chapman Jr., is chairman of the University of Maryland Board of Regents and a close ally and financial backer of Maryland Gov. Parris N. Glendening.
At the same time, the board reported that it ended 2001 with $28.4 billion in assets, down 12.8 percent during the past 12 months a worse performance than the benchmark Standard & Poor's 500 index. The firm had been expected to be terminated because of the pension fund's poor performance.
Several trustees told the Baltimore Sun that the board took action after hearing from the SEC's counsel. They were told that federal regulators are investigating reports that a fund manager chosen by the firm had invested state pension money in Mr. Chapman's parent company.
Trustees were told that stock in eChapman.com, bought by pension fund money, may have been purchased for more than the market rate. The stock now is devalued.
One unidentified trustee told the Sun, "This doesn't pass the smell test."
Chapman Capital's investment of state money in eChapman.com accounted for about one-fifth of the parent company's dwindling revenue last year. Calls to Mr. Chapman and his company were not returned. SEC officials said they do not comment on pending investigations.
Pension board members estimated that the state lost hundreds of thousands of dollars on its investment in eChapman stock. The $174.4 million managed by Chapman Capital was a small fraction of the entire pension fund.
The loss is not enough to endanger anyone's pension, but it is another strike withstood by an embattled system. Its investments overall are down about $4 billion during the past 18 months.
Chapman Capital's record as a money manager long has been debated within the pension board, but the firm had resisted attempts to terminate it.
During a three-year period, the firm lost 2.2 percent of investment assets, compared with a benchmark of a 0.4 percent gain. Over the past year, the Chapman trust lost 18.8 percent of its value while the S&P; 500 was dropping 11.9 percent.

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