Aug. 15–State Treasurer Timothy Cahill yesterday ousted James Hearty, the executive director of the state agency that runs the $28 billion employee pension fund, replacing him with a corporatefinance executive with a decade of economic development and investing experience in Southern Africa.
Cahill, who is also chairman of the Massachusetts Pension Reserve Investment Management Board, made the surprise move in a private meeting with Hearty yesterday afternoon, shortly after the pension board held its monthly business meeting. Ironically, the only question about Hearty’s tenure that came up during the public meeting was the board’s upcoming annual review of Hearty’s performance, and a possible pay increase.
Cahill, in office since January, had been quietly plotting Hearty’s replacement for weeks, and waited to make his move until he had four other board members — enough for a majority — lined up behind his choice for the next executive director. Cahill will recommend Steven Weddle, 44, a Milwaukee native who since 1993 has been doing corporate finance, venture capital investing, and economic development from postings in Lusaka, Zambia, and Johannesburg.
The treasurer then sprung the news on Hearty in a meeting at Cahill’s Beacon Hill office, just hours after pension board members were given forms to evaluate Hearty’s job performance over the last year.
“I think he was surprised, but not shocked,” Cahill said of Hearty’s reaction. Cahill said that Hearty had agreed to help in the transition.
The 51-year-old Hearty, who has run the agency since April 2001, did not return phone messages seeking comment left at his office and home yesterday.
In an interview, Cahill praised Hearty’s performance, but did express frustration at what he felt was an agency that was set in its ways and reluctant to change. He cited, for example, the agency’s refusal to release records about the fund’s investments in venture capital and private equity funds, even though it had been ordered to do so by the Massachusetts secretary of state and attorney general’s offices. Another issue, Cahill said, was the agency’s reluctance to seek lead plaintiff status in shareholder lawsuits against companies accused of securities wrongdoing.
“We need to be a little more progressive. We shouldn’t always be at the back end of some of these issues,” Cahill said. Citing the public records issue, for example, Cahill added, “I don’t know if it was Jim personally, but I got a sense that this was not something PRIM wanted to do, or should do. It’s important to have an open mind and an ability to change when it’s clear we should change policy.”
Though executive director for just two years, Hearty has been a fixture at the board since 1991, when he served as a high-level finance aide to the governor, William Weld, who appointed him to the board. He served as a board member for a decade before resigning in 2001 to seek the executive director’s job. He also held high-level jobs at the former Bank of Boston and Lehman Bros.
The PRIM board position is one of the highest paid in state government; Hearty’s recent salary was $212,000, plus performance bonuses.
Cahill’s move caught many in the small world around the pension agency off guard. Several of Hearty’s top staffers did not know of his ouster late yesterday afternoon. Pension board member Robert Brousseau said he didn’t even know a move was afoot until Cahill called him in the afternoon, after the treasurer had already met with Hearty.
“It came out of the blue to me,” Brousseau said. While not outright opposing Cahill’s move, Brousseau worried about the effect Hearty’s abrupt dismissal would have on the PRIM staff. “I’m concerned that when something like this happens, that we don’t send a very bad message to our staff. These things can be devastating, when you find out the boss has been asked to leave.”
One of the board members who did know of the maneuverings and supported Cahill is Ralph White, who said Hearty “is a pro” who should have expected a new treasurer would want his own leadership at such a key agency.
Noting how the former treasurer, Shannon O’Brien, was pilloried for the pension fund’s poor performance during her 2002 gubernatorial campaign, White said, “how the board performs is always fodder at election time. That’s the way it is. And I think the treasurer wants the board to perform to the best possible level, and I think he felt new leadership is in order, because in the long run he’s responsible as chairman.”
Since taking over, Cahill has aggressively pushed the pension fund to invest in hedge funds, as a way to generate positive returns when the stock market is in a decline, and to allocate funds for nontraditional investments that produce economic and social benefits to Massachusetts.
Cahill’s nominee has particular experience on the latter issue. For six years Weddle ran the Southern Africa Enterprise Development Fund, a $100 million effort that invested in small and medium-size businesses in the region.
In an interview from New York, where he is visiting relatives, Weddle said he highlighted his development experience in interviews with Cahill “as something that I would bring that someone else would not.”
Cahill added, “Steve Weddle presents to me a very strong candidate that brings a different perspective,” including “working in a difficult investment environment.”
Weddle, whose nomination will be brought before the PRIM board on Oct. 5, was introduced as a candidate for the position by an acquaintance, pension board member David Grain.
Grain, who met Weddle in the 1980s when they both worked in the securities industry, described him as a “high-quality candidate with very relevant experience, who is an outsider and brings no biases to the state and board. A real grown-up investment professional.”
Beth Healy of the Globe staff contributed to this report.
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