For the second time, the Board of Estimates deferred action yesterday on a first-of-its-kind proposal to invest up to $10 million in city workers' pension money in a private company, pending an independent legal opinion on the proposal's legality.
Mayor Kurt L. Schmoke, who sits on the board, asked for the first deferral two weeks ago. Yesterday, he meticulously questioned the proposal to allow the Chapman Co. Inc. to invest the money.
Trustees for the Employees' Retirement System and the Fire and Police Employees' Retirement System already have signed off on the plan, which also has the blessing of the city's pension administrator.
Those approvals, however, came only when Chapman's initial investment proposal to the pension boards was dramatically changed late last year, after an independent financial consultant, Churchill Investment Partners, reviewed the scheme for the trustees.
While the pension trustees, led by Thomas P. Taneyhill, the city's deputy pension administrator, and representatives of the company, including president Nathan A. Chapman Jr., tried to allay the mayor's concerns, Mr. Schmoke persisted in questioning the plan.
"This is unprecedented," Mr. Schmoke said. "This is not just your run-of-the-mill transaction."
Mr. Schmoke questioned whether the plan was legal under Maryland law. Though proponents said the plan probably was legal, the mayor said he wanted the city solicitor's office to contract with an independent law firm to answer that question.
Mr. Schmoke also was concerned about the appearance of a conflict of interest on the part of Kenneth P. Taylor, a Chapman employee who sat on the fire and police pension board.
While proponents said Mr. Taylor had recused himself from any action on the Chapman plan and recently resigned his position from the board to avoid the appearance of a conflict, the mayor said he wanted the resignation letter and copies of three letters from the city ethics board on that point made part of the record.
The proposal provides for both pension plans initially to purchase $5 million of stock -- $2.5 million from each plan -- in the minority-owned Chapman firm to raise the net capital of the company. That would allow Chapman to underwrite other companies -- in particular, other minority-owned concerns. The investment of the remaining $5 million would be contingent on Chapman's success with the first investment.