Bad Investments May Cost Maryland
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BALTIMORE (AP) _ Maryland’s retirement fund could lose more than $4 million because a former investment firm sunk millions of dollars into its own parent company’s stock, records show.
Two money managers for Chapman Capital Management spent $5.1 million from the retirement fund to buy 395,000 shares of eChapman.com when it was first sold to outside investors, according to state records obtained by The Baltimore Sun.
The stock sold for $13 a share at the time; it is now worth 17 cents a share.
The June 2000 purchase represented nearly a third of eChapman.com’s 1.26 million shares on the market. The initial public offering raised $16.4 million for the company, records show.
The state pension board fired the firm in January after learning that the Securities and Exchange Commission was investigating the stock purchase. The company managed about $175 million of the state’s $27 billion in assets.
Nathan Chapman Jr., Chapman Capital’s chief executive, said managers he hired had been using state pension money to buy his companies’ stock since 1998 and that pension system officials knew about the investments.
``I discussed the position with clients at various times _ including the state of Maryland retirement system _ and no client ever had an issue with it,″ Chapman said.
Chapman, who is also chairman of the University System of Maryland board of regents, owned up to 65 percent of eChapman.com before the IPO.
The state pension board took control of the shares in February and began selling some of them. However, Maryland Comptroller William Donald Schaefer said he is reluctant to sell while the price is so low.
One investment expert said he doubts the state will recoup much of its investment.
``I hate to say something about a company’s future, but it’s going to have to do marvels to get back to the offering″ price, said Michael Falbo of Los Angeles-based IPOPros.com.