Treasurer receives warning on style

Influential legislators have warned Maryland Treasurer Richard N. Dixon that his strong-willed and sometimes tactless leadership of the state's pension system could create political problems for him when he seeks re-election.

Dixon has alienated several members of the retirement system's board with his leadership style and aggressive investment strategies - prompting complaints to leaders of the General Assembly, whose members have twice elected the former Carroll County lawmaker to the powerful post.


The treasurer brushed off the criticism and insisted he plans no changes in the way he does business. "There are people who don't like me because I'm not out to make friends with anybody," he said.

Some pension board members are especially concerned about Dixon's persistent moves to increase the percentage of the state's pension fund investments in the stock market. They have shared those worries with legislative leaders, who are urging caution.


Board members have also complained about Dixon's openly contemptuous treatment of a respected financial adviser whom Dixon blocked from reappointment to the panel's investment committee.

The adviser, Howard P. Colhoun, now describes the way the pension system is run as a "dictatorship."

Dixon, 63, is up for re-election tomorrow as chairman of the $30 billion State Retirement and Pension System, and it appears likely that he will keep the post he took over after the death of longtime Maryland Comptroller Louis L. Goldstein.

But Dixon has created political problems for himself that could come back to haunt him in 2003, when he plans to seek a third term as treasurer.

House Speaker Casper R. Taylor Jr. said he has heard complaints about Dixon from several members of the pension system board. The system covers more than 214,000 members and 77,000 retirees and beneficiaries.

The complaints "have caused me to have conversations with the treasurer," Taylor said.

Senate President Thomas V. Mike Miller said he, too, wants to talk to Dixon.

"I was going to try to talk to Richard, just to advise him that there were concerns out there, from a number of different sources. The speaker and I want to continue to work with him," Miller said.


Del. Howard P. Rawlings, chairman of the House Appropriations Committee, predicted that Dixon will "moderate" his behavior. "I know Richard has that survival instinct," he said.

Rawlings, a West Baltimore Democrat, said that in the end Dixon will be judged not on personality but upon his financial performance as state treasurer.

According to Dixon, that performance has been exemplary. He noted that the value of the pension fund's assets has increased from about $20 million to $30 million over the last four years, leaving the system close to being fully funded.

"Because of actions initiated by me, we made $820 million the last two years," Dixon said.

He said he is hardly ever wrong about investment decisions.

"There is not one thing I've done that's done other than enhance the value of our assets," Dixon said. "I am very good at what I do."


To emphasize his point during an interview at his home in New Windsor, Dixon showed a reporter the cars in his garage and driveway - a Lincoln Town Car, a Chevrolet Blazer sports utility vehicle and a bright-red 1994 Corvette. "They are all from money I made in the stock market," he said.

In the past, Dixon's political skills have been acute enough that the African-American Democrat won four terms in the House of Delegates in an overwhelmingly white, largely Republican district.

But since his election as treasurer, Dixon has become well-known in Annapolis for boasting about his achievements.

The former stockbroker's penchant for proclaiming himself "the best treasurer in the nation" has rubbed some people the wrong way, while others in state government treat his behavior as a joke. Some legislators refer to him mockingly as "B.T." - for "Best Treasurer."

Pension system trustees, however, found little to laugh about in the hardball tactics Dixon used to block the reappointment of Colhoun, an 18-year member of the board's investment committee who was once a regular on "Washington Week in Review."

In April, members of the committee voted overwhelmingly to re-nominate Colhoun, who had clashed with Dixon over some investment decisions, as one of three professional advisers on the panel.


They acted after Dixon stalked out of the meeting vowing to block Colhoun's nomination when it came before the three-member state Board of Public Works. It is made up of Dixon, Gov. Parris N. Glendening and Comptroller William Donald Schaefer.

Before the Board of Public Works could act, Colhoun withdrew his name from consideration. But Dixon, who had tried unsuccessfully to block Colhoun's reappointment three years ago, was so adamantly opposed that he tried to force a vote anyway at the May 10 meeting.

The treasurer did not succeed; Glendening ruled that Colhoun's withdrawal took the matter off the agenda.

Dixon acknowledged yesterday that he set out to drive Colhoun from the pension board and enlisted the support of Comptroller William Donald Schaefer to do so.

"He was against local firms. He was against minority firms and, in my opinion, he doesn't have that much expertise in investments," Dixon said. He said that on two investment decisions that netted the state $820 million, Colhoun voted no.

Colhoun said Dixon's opposition was not about minority firms or investment judgments, but a discomfort with having an experienced member who would not be "subservient."


"Dixon doesn't want a person like me - me in particular - looking over his shoulder," Colhoun said. He said there is a danger that Dixon will take personal control of a once collegial investment process that has produced healthy returns for some 15 years.

"It's the biggest pool of money in Maryland. How it's treated is very important. It affects the taxpayer immensely," Colhoun said. "It affects the state's credit rating."

Colhoun said he supported increasing the participation of minority firms before Dixon came to the pension board. "Nobody in today's world likes being called a racist. And he will do it. It's his last trump card," Colhoun said.

Even trustees who normally support Dixon say they were disturbed by his treatment of the veteran investment adviser.

"That did not go well with me," said Ali Alemi, who said he spoke to Dixon about his efforts to thwart the board's majority. "Frankly, I think both fellows, Dixon and Colhoun, in their own right have been an asset to the board."

Alemi said that otherwise he has no quarrel with the way Dixon is leading the panel. "We are all respecting each other's views," he said. "Nobody is following anybody else's lead," he said.


But Wayne Shaner, one of the remaining professional advisers on the investment committee, said there has been a marked change in atmosphere at its meetings since Dixon was chosen as pension board chairman.

"It's gotten less collegial in the last year and a half," he said. "Some of the political forces are stronger than they were in the past."

Dixon said he's not aiming to forge a consensus. As soon as he has a majority on a issue, he takes a vote, he said.

"Our board liked to debate things and debate things and debate things and not take any action. I'm an action person," he said. He said the complaints were the work of a minority of the panel's members.

Some members are also concerned that Dixon is pushing the pension system, which covers public school teachers as well as state and local government employees, too far in its percentage of funds invested in the stock market. Over the past few years, the percentage in stocks has increased from about 62 percent to 72 percent. The pension board recently authorized a strategy change that could take the total to about 76 percent.

"People say the stock market goes up and down. That's not true. The market goes up - particularly when you invest in quality," Dixon said.


House Speaker Taylor, a Cumberland Democrat, said he is seeking professional advice about the state's investment strategy, noting that experts can have honest differences. But he said the legislature would prefer to see the state err on the side of caution in its investments.

So far, Glendening has remained distant from the dispute, though his former budget chief, Frederick W. Puddester, occasionally clashed with Dixon both on the pension board and its investment committee.

The governor could be drawn into the fray if Dixon decides to leave Puddester's successor, Eloise Foster, off the investment committee. Dixon said yesterday that such a move is possible.

Glendening spokesman Michael Morrill said any effort to exclude Foster from Puddester's former roles would raise a red flag. He said it is important to have the state budget secretary on the investment committee to represent the views of the administration.

Sun staff writers Thomas W. Waldron and Eileen Ambrose contributed to this article.

For the record

The age of State Treasurer Richard N. Dixon was incorrectly reported in an article yesterday. He is 62. The article also misidentified a television program on which investment adviser Howard P. Colhoun has appeared. It is "Wall Street Week with Louis Rukeyser."The Sun regrets the error.