Quit, Charlie, quit.
Not your bid for governor — please no, because then it would truly become the Most Boring Race Ever — but your day job at General Catalyst.
For weeks, Charlie Baker and his Cambridge venture capital firm have been caught up in a brouhaha over a $10,000 political donation he made in 2011 to New Jersey Republicans in a nod to Governor Chris Christie. About six months later, the state of New Jersey pledged to invest $25 million of its pension money in a fund managed by General Catalyst.
What’s got tongues wagging is whether Baker and General Catalyst violated federal and New Jersey pay-to-play rules that prohibit such campaign contributions so outside money doesn’t influence the awarding of pension contracts.
General Catalyst and Baker maintain he is not an employee of the firm, therefore no rules were broken. Yes, he’s listed on the website as an “XIR/partner” (translation: executive in residence), has an office, and shares an executive assistant, but he doesn’t get a paycheck.
Baker’s defense reminds me in some ways of the way Bill Clinton dealt with Monica Lewinsky. Our gubernatorial candidate’s version: “I did not have employee relations with that company, General Catalyst.”
Okay, to be fair to Baker, there are some big differences here. While there is a relationship between Baker and the venture firm, neither is trying to hide anything, and ultimately, I don’t think they intentionally did anything wrong.
To prove his case, Baker hired Anthony Herman , the former general counsel of the Federal Election Commission. I got a first look at Herman’s 14-page legal opinion, which concludes Baker’s contribution to the New Jersey Republican State Committee “violated neither the spirit nor the letter of the ‘pay-to-play’ rules.” Hardly a shocking conclusion, since Baker is footing the legal bill.
Still, the New Jersey State Investment Council wants to clarify the situation, says chairman Bob Grady. Last week, he sent a memo to that state’s Division of Investment asking the office to look into the matter.
The argument could be made that Baker and the firm broke the council’s pay-to-play rule prohibiting contributions to a state party committee by “any investment management professional associated with such investment management firm” within 18 months of negotiating or receiving a New Jersey contract worth more than $17,500.
But the policy is so broad it could apply to non-employees like Baker, and that’s the central question the council wants to address.
“It is an appropriate and natural reaction to review whether Charlie Baker is an investment management professional,” said Grady, a Garden State native who is a childhood friend and adviser to Christie, and managing director of a Wyoming private equity firm.
If it turns out there is a violation, Grady said, the state would terminate the General Catalyst contract.
If New Jersey is sniffing around, could the Securities and Exchange Commission be far behind? Already, gubernatorial frontrunner Martha Coakley has asked the agency to check out the pay-to-play allegations, which were first reported earlier this month by the tech site PandoDaily.
Baker doesn’t manage funds, but in his role as executive in residence, the former Harvard Pilgrim CEO gives advice on what startups General Catalyst should invest in. His arrangement arguably is cozy.
In a phone interview Tuesday, Baker said he and the firm set up a company called CBDI, which General Catalyst seeded. CBDI then pays Baker a consulting fee. He wouldn’t say how much.
“I’m another portfolio company, like the many other companies they seed and invest in,” said Baker.
Two months after teaming up with General Catalyst in 2011, Baker opened his wallet when Christie came up to Boston to attend a fundraiser for New Jersey Republicans. Baker appreciated Christie campaigning for him twice during his unsuccessful race against Deval Patrick in 2010.
When Baker decided to run again last September, he significantly scaled back his work at Genera l Catalyst, but continues to sit on the boards of three companies he discovered through the venture firm. So if he’s not an employee and he’s already reduced his workload, why not cut ties altogether?
“I want to stay involved with those three companies,” he said. “They are important to me and they are important to General Catalyst.”
But wouldn’t ending the relationship help distance himself from the controversy?
“That’s one of the benefits of seeking public office,” said Baker. “You don’t have to do anything wrong to get dragged into a bad headline.”
I don’t know if we will ever call Baker governor, but you can call him loyal -- perhaps to a fault.
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