Matt Bevin, who may challenge Senate Republican Leader Mitch McConnellAddison (Mitch) Mitchell McConnellThe Memo: Trump's justices look set to restrict abortion Conservatives could force shutdown over Biden vaccine mandate Freedom Caucus urges McConnell to block government funding over vaccine mandates MORE (R-Ky.), is distancing himself from improper activities that took place at an investment company where he worked a decade ago.
Bevin, a New Hampshire native, was virtually unknown in Kentucky political circles until a few weeks ago when he began reaching out to Tea Party leaders to explore a race against McConnell in the 2014 Republican primary.
Some of the initial reviews of Bevin among conservative activists have been positive, but as they begin to dig into his record Bevin will have to address his role at a company that was penalized hundreds of millions of dollars for its role in a market-timing scheme from 2001 to 2003.
If Bevin pulls the trigger, he will face a bruising race against McConnell, who has stockpiled $7 million in his campaign war chest. McConnell has a history of making races about his opponent. He first won election to Congress by highlighting then-Democratic Sen. Dee Huddleston’s spotty attendance record.
Bevin’s tenure as director of product management at a division of Invesco from 2001 to 2002 could provide McConnell’s campaign with a target. The Securities and Exchange Commission found Invesco Funds Group participated in a market-timing scheme from 2001 to 2003 that diluted shareholder value for the benefit of large privileged investors.
Invesco settled the SEC enforcement action by agreeing to pay $325 million in disgorgement and penalties after the agency determined its market timing trades were “detrimental to Invesco funds’ shareholders.”
Bevin said he had no knowledge of the market-timing activities connected to Invesco Funds Group, based in Denver.
He said he worked for a Kentucky-based division of Invesco that “was never associated with any market timing and was never a part of any settlement that was made by Invesco.”
“I personally was not involved with and have no knowledge of any of the decisions that were made by folks at Invesco as it related to their other mutual funds which were managed out of Denver, CO,” he wrote in an e-mail to The Hill.
Invesco is a large global investment manager with more than 600 investment professionals spanning 20 countries, according to a description posted by the company last month.
Al Cross, a political commentator and director of the Institute for Rural Journalism and Community Issues at the University of Kentucky, said Bevin could face political repercussions if he is found to have any involvement in the market-timing scheme.
“In layman’s terms, that’s manipulation of the stock market. I think it would be absolutely politically damaging,” said Cross. “McConnell has always been a master of making whatever race he’s in a race about the opponent and not himself.”
A biography of Bevin posted on the website of Waycross Partners, where he is listed as a partner and adviser, states that he worked at Invesco as the director of product management. Bevin’s LinkedIn page states he was director of product management at Invesco-NAM from May of 2001 to December of 2002.
The distinction is important because if Bevin had authority over product management across Invesco, he could have been in a position to know about the market-timing scheme. But if his work was confined to Kentucky-based operations, it would be difficult for McConnell or other political opponents to link him to the scandal.
Bevin said he came under Invesco’s umbrella when it bought National Asset Management, where he served as director of marketing and principal from 1995 to 1999.
“Invesco purchased Kentucky-based National Asset Management (NAM) in May of 2001. At the time, I was a partner with NAM and we became a wholly owned division of Invesco,” he explained. “During the approximately 18 months that I remained with that division, I only had Invesco-NAM business cards and only represented the products managed in Kentucky by Invesco-NAM.”
Bevin said the biography posted by Waycross Partners is inaccurate and said he would soon address it. He said he never worked at Waycross and holds the title of partner as a result of providing investment capital to the firm.
“They are Kentucky investors, who I am trying to support as they create local jobs and manage investments for primarily local investors,” he said of Waycross.
“I was never in a ‘senior management position’ at Invesco, which is headquartered in Atlanta, GA, or at Invesco Funds, which was in Denver, CO. Neither was based in Kentucky where I lived and worked,” he stated in an e-mail.
Conservative activists say they want to carefully vet Bevin or any other candidate who wants their support in the 2014 primary.
“We would do significant vetting. That’s the key thing we learned. You really need to know and have a relationship with the people with whom you’re working,” said John Kemper, spokesman for the United Kentucky Tea Party. “Obviously, it sounds like more information needs to come out on this before folks take a position on his business dealings.”
Bevin said conservative activists and journalists should be wary of any information his political rivals may peddle to connect him to Invesco’s market-timing activities.
“Please be careful as to the ‘information’ that is leaked to you by those with their own agendas,” he wrote in an e-mail. “Your journalistic credibility is not likely at the top of their list of concerns and half-baked stories tend to undermine your reputation over time, not theirs.”
Product managers are in the thick of Invesco’s sales and trading operations. According to a description of the job posted on Invesco’s LinkedIn page, product managers are in charge of bridging the sales and investment teams, providing commentary for internal and external client usage and training the sales team on investment strategies.
The SEC found that from 2001 through July of 2003 Invesco Funds Group, Inc. “entered into undisclosed market timing agreements with over 40 individuals and entities, which allowed them to market time certain Invesco funds.”
Invesco gave certain traders access to its funds to make lightning trades taking advantage of pricing flaws caused by information lag spread over several time zones. In return, favored investors parked big chunks of funds in long-term investments.
Some of the timing agreements were entered into with the understanding that the market timer would maintain long-term investments, so-called “sticky assets,” in certain non-timed Invesco funds.
The quick inflows and outflows of money preyed on pricing flaws created by information lag between U.S. and foreign markets — a practice known as time-zone arbitrage. It was not illegal, experts say, but it diluted the value of Invesco’s fund for long-term investors. Regular investors who parked their money at the fund used for the arbitrage would see value erode as favored investors poured in and then quickly withdrew large sums to take advantage of pricing disparities.
At the height of activity, market timers held over $1 billion of the assets invested in Invesco funds and made excessive exchanges and redemptions totaling approximately $58 billion.
“In the aggregate, the market timing trades made under the agreements were detrimental to the Invesco funds’ shareholders,” the SEC announced in an enforcement action against Invesco.
Bill Hensel, a spokesman for Invesco did not respond Friday to a request for comment.