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Weld firm is Boston fund finalist

Ex-governor met with state officials to pitch investment

Former governor William F. Weld's investment firm is a finalist to manage a portion of the City of Boston's pension funds, and Weld personally met with Massachusetts officials to try to persuade them to invest state pension money in his company's private equity fund.

Weld and several colleagues from his New York firm, Leeds Weld & Co., met in February with Massachusetts Treasurer Timothy Cahill, who chairs the state pension board, in Cahill's Beacon Hill office, to pitch his firm's latest fund, which plans to invest in education-related businesses. Several members of the Massachusetts pension agency also have paid "due diligence" calls on Leeds Weld in New York City over the past 14 months to more closely examine the firm.

While intrigued by the firm's focus on for-profit opportunities in the education and training industries, Massachusetts officials said the pension agency's private-equity consultant next month will recommend the state not invest at this time because, in its current composition, the firm doesn't "have a long enough track record," said Doug Rubin, first deputy treasurer, who participated in the meeting with Weld. Weld joined the firm in December 2000, when it was renamed Leeds Weld, and another senior member became a principal last year.

But state pension officials indicated the agency would continue to monitor Leeds Weld's fund-raising and investment activities to see how it fares.

Leeds Weld is one of four finalists to invest City of Boston pension funds in alternative investments such as company buyouts, said Robert Tierney, executive officer of the Boston Retirement Board. Leeds Weld responded to a public bid proposal and was included on a list of eight candidates selected by its outside consultant. The list was winnowed to four firms at a board meeting this month, and Tierney said the winner may be selected at a meeting Sept. 18. Tierney couldn't say how much money is involved, or whether Weld himself participated in seeking the Boston award.

Reached by telephone in upstate New York yesterday, Weld said he was about to go fishing and didn't have time to talk. "I've got a fishing rod in one hand," he said, and referred calls to his office. Weld's partner, Jeffrey T. Leeds, didn't return phone calls seeking comment.

Weld apparently is not prohibited from seeking the Massachusetts investment since state law, in general, bars former elected officials from soliciting state business for only one year after leaving office, and Weld resigned his post in July 1997.

Leeds Weld's efforts to raise money from public pension funds is raising hackles among unions and retirees, however. For one, as governor Weld amassed a record of aggressive budget-cutting and privatization of public services that resulted in layoffs of thousands of state workers. Moreover, the firm was an early backer of, and through an entity, a shareholder in Edison Schools Inc., the controversial New York company that manages public school districts around the country, to the opposition of school-employee unions.

"It would have to be one hell of a good investment for me to put my money" in it, said Robert Brousseau, a retired Wareham teacher who represents the state teachers retirement system on the Massachusetts pension board.

Because of its Edison Schools investment and Weld's gubernatorial record, Leeds Weld had been the target of a campaign by the Service Employees International Union, which represents school janitors among others, to dissuade public pension funds from investing in the firm.

Two weeks ago, shortly after Edison founder Christopher Whittle said he would lead an effort to buy out existing shareholders and take the company private, Leeds Weld announced a truce with SEIU. In an Aug. 13 statement, Leeds cited "political risks" in explaining why it will no longer invest in companies that pursue education privatization. Brousseau said he is suspicious. "They're not now going to do it. Can you believe that? There's more than one way to skin cats," he said, adding that he would be reluctant to trust that the firm won't at some point in the future invest in such companies. "If it's going to lead to the layoff of employees in this state or other states, I wouldn't support that," Brousseau said.

But Rubin said that union opposition or politics won't be an issue in deciding to invest in Leeds Weld in the future. "The only thing that would matter to the treasurer was whether it is a good investment opportunity," he said.

Leeds Weld earned more than five times its original investment in Ross University when the operator of medical and veterinary schools in the Caribbean was sold earlier this year for $310 million, said Dave Conrod, a managing partner at Links Capital Group, which is acting as a placement agent to find investors for Leeds Weld. "That's a huge return," said Conrod, who described the investment team at Leeds Weld as "five-star."

Indeed, Weld is just one of many luminaries at the firm. Former New York Mayor Rudy Giuliani, former US Secretary of Education Richard Riley, and former Clinton chief of staff Thomas McLarty III are on the firm's advisory committee, and former Simon & Schuster chief executive Jonathan Newcomb is a principal. Jeffrey Leeds, a former investment banker, cofounded the firm in 1993.

But another state pension board member, Ralph White, isn't impressed. Noting Weld's gubernatorial reputation for knocking off work early, White said he did not think state workers "could take him seriously as far as someone to invest money with."

Andrew Caffrey can be reached at caffrey@globe.com.

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