Inquiry focuses on friend of treasurer

A Charleston political operative and financial consultant is ensnared in an alleged “pay-to-play” scandal involving the commission that handles state pension investments.

Mallory Factor, also a professor of American government at The Citadel, is part of a State Law Enforcement Division investigation, a SLED spokeswoman confirmed late Wednesday.

Factor and his associates made calls in the fall to two unidentified investment companies, according to documents provided to The Associated Press.

An employee from one of the companies called a South Carolina retirement fund official in November, saying, “I received a phone call that made it sound like in order for us to be considered to work for them, we had to pay an elected official,” S.C. Retirement System Investment Commission Vice Chairman Reynolds Williams told the AP.

Factor is a friend of S.C. Treasurer Curtis Loftis, who is the only elected official serving on the commission.

Reached Wednesday night, Factor told The Post and Courier no money changed hands.

“It can’t be pay-to-play because I’m not an elected official,” he said. “There’s been nothing. There was no money.”

Factor characterized as “innuendo” allegations that he acted as a conduit between the investment firms and Loftis.

Factor told the AP late Wednesday that SLED is treating him as a witness, not the target of the inquiry.

The S.C. Retirement System Investment Commission referred the matter to the S.C. attorney general’s office in November.

“Certain of the statements which are alleged to have been made constitute a serious misrepresentation of the Commission’s investment manager search process,” Investment Commissioner Robert Feinstein wrote in a Nov. 21 letter to the attorney general’s office.

“The Commission was also concerned that certain of the actions referenced ... might violate federal and/or state securities laws.”

In December, the attorney general’s office asked SLED in a letter to assign an agent to investigate a “possible ‘pay to play’ scheme.”

Loftis released a statement Wednesday night saying, “I was one of the commissioners who voted in favor of a review by the attorney general’s office regarding investment work that was being conducted by the commission. I look forward to a speedy review and resolution to these questions.”

One investment company that reported Factor to the state said the Charleston man said he was calling on behalf of the S.C. Retirement System. Factor told the company there was a “newly elected official on the board and that he had done pro bono work for him,” according to a report of the call.

Factor said he wanted a “three- or four-year payout” from the company for recommending them to the state, according to the report.

A second investment company reported that Factor’s associates said a “referral fee” was required in order to be listed among companies that South Carolina would consider for work. One associate told the company he was working with Factor, explaining that he is connected politically.

One investment company said it took calls from people who said they were associated with Factor. The callers told the investment company that the elected official on the commission was unhappy with the state’s current investment managers.

The callers said “Factor agreed to provide candidates” to replace them, according to the report of the phone call.

Williams, the retirement commission’s vice chairman, told the AP, “I’m concerned that a friend of the member of the commission may have run his mouth when he shouldn’t have.”

Factor said Wednesday he is a “third-party marketer” of investment firms he wants the state to do business with. If the state hired a firm he markets, he gets a cut — generally about 20 percent — of the fees paid by the state, he said.

Factor said he tried to discuss the firms he represents with the Retirement System Investment Commission. Loftis was the only commission member to engage him, he said.

“The other ones blew me off,” he said.

Loftis told the AP that he doubts any wrongdoing occurred. He rejected the “pay to play” label from the attorney general’s office.

“We don’t have any reason to believe that that stuff happened,” Loftis said.

Third-party agents such as Factor are legal, Loftis told the AP.

Reach Renee Dudley at 937-5550 and on Twitter @renee_dudley.

A previous version of this story contained an incorrect spelling of Reynolds Williams' first name.