Sep. 20–State Treasurer Jack Voight stepped up the pressure on Strong Capital Management Friday, calling on the Menomonee Falls-based company to make up any losses it might have caused investors inthe EdVest college savings program and pledging to address the issue in a public meeting next week.
Voight said the state’s College Program Board, which oversees Wisconsin’s college savings programs, will use a Tuesday meeting to discuss what to do about recent allegations that Strong gave New Jersey hedge fund Canary Capital Partners special trading opportunities in several Strong funds.
Of the items on Tuesday’s revised agenda, “number one is to make sure that all investment accounts are made whole if there’s any losses,” said Voight, who serves as the board’s vice chairman.
Strong was one of four mutual fund companies named in a Sept. 3 complaint against Canary filed by New York Attorney General Eliot Spitzer. The complaint said Canary used its size to gain privileges from the four companies not available to ordinary investors.
Strong, the complaint said, let Canary make short-term trades of shares in several mutual funds, including the Strong Growth Fund, which is offered as part of the state-sponsored EdVest program. Strong is the only one of the four companies in the complaint that has not pledged to repay investors’ possible losses.
In all, EdVest program manager Marty Olle said investors in it and another state-sponsored savings program, Tomorrow’s Scholars, had invested some $182 million in Strong funds named in the Spitzer complaint. These account holders could have suffered as a result of the alleged short-term trades, incurring costs associated with the transactions without receiving any of the profits.
Olle said his office had received about 40 calls this week from concerned investors and had arranged to hold the board’s public meeting in a bigger room to accommodate a larger group of attendees.
Strong spokesman Drew Wineland said company representatives would be on hand for the Tuesday meeting and would share information about Spitzer’s ongoing investigation. He declined to comment, however, on whether Strong would also pledge to make investors whole.
Strong’s silence on that point has worried EdVest investor Bill Van Lieshout of Madison, who holds an account for his two-year old son Cade.
“That disturbs me a little bit,” said Van Lieshout, 48, who’s considering attending the meeting Tuesday.
In a statement posted on the company’s Web site, Strong’s founder and chairman Richard S. Strong said Thursday that his company was cooperating with regulators and “working with outside professionals in conducting a thorough internal review.”
Jack Voight said that wasn’t enough.
“I have a guarded optimism that things are all right with Strong but I want to see for myself,” said Voight, who said he wants the state to name an independent auditor to review the funds.
And though Voight stressed that his office had been pleased with Strong’s performance overall, he said he also wanted the board to discuss the possibility of amending the state’s EdVest contract to give investors the chance to choose other vendors. So far, EdVest investors have had only one choice, Strong, for market-based options such as mutual funds.
All of that came as good news to Bill Van Lieshout, who said he would wait until next week before he made any decision on whether to keep his money in funds managed by Strong.
“I’m not pushing the panic button just yet, I want to see how this plays out,” Van Lieshout said.
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(c) 2003, The Wisconsin State Journal. Distributed by Knight Ridder/Tribune Business News.
