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Interview: Walker Stapleton would make fixing PERA top priority as Colorado Treasurer

Walker Stapleton said in a recent interview that he believes his experiences as an investment banker, chief executive officer, real estate and stock investor and chief acquisitions officer for a large company would help him be a strong Treasurer for Colorado. He is seeking the Republican’s nomination for Treasurer. His opponents are Ali Hasan and J. J. Ament. Links to my interviews with them are below the jump. Democrat Treasurer Cary Kennedy is seeking re-election.

Stapleton said that his goals as Treasurer would be to use the Treasurer’s position on PERA’s board of directors to help the General Assembly fix the beleaguered state employees pension fund. He also would work to improve the state’s returns on its investments.

“One my top priorities as Treasurer would be to find a long-term fix for PERA. I don’t think Kennedy has taken an activist role on the PERA board. Given that taxpayers will be required to back up PERA” if it can’t recover its recent losses on its investments.

The recent legislative fixes for PERA, which Governor Bill Ritter just signed into law, were in the right direction but don’t go far enough to serve the long-term liabilities problems, Stapleton said.

“We need to give current enrollees in PERA the option to pay higher contributions or to go to defined contribution from a defined benefit plan,” he said, adding, “If you look at defined contribution plans, it allows the enrollee and the retiree to be a partner with PERA in investing. Defined benefit it is built on an optimistic assumption of 8.5% return on PERA’s investments.” He thinks it would be more conservative and reasonable to assume a 4.5% return.

“The underlying assumptions are erroneous,” Stapleton said. This will cause losses that will “end up on backs of kids and grand kids.” What’s important, he said, is that to achieve the assumed 8.5% return, “You have to have 75% of the portfolio in risky equities and be more vulnerable to the stock market. Most pension plans have more in real estate, bonds, because they’re not on the high speed treadmill to meet these unrealistic return expectations.”

Over last fiscal year, 2009, in a number of quarters PERA took in $500 milllion in contributions from state employees and paid out $1 billion to pensioners, Stapleton said. “What assets were they selling?” he asked.  He said that he sat down with PERA’s investment officer to talk about how PERA tracks its investments. PERA’s managers told him, Stapleton said, that “they had no program to track sales of investments in their portfolios, which I found to be surprising.”

Stapleton sees a major conflict of interest on the PERA board. This is because state employees are PERA beneficiaries and make decisions that favor beneficiaries rather than taxpayers.

“I would immediately push for change in makeup of board. The board shouldn’t have beneficiaries who have their hands in the cookie bar on the board. You have to have board members who have no interest in PERA. Otherwise they are compromised,” he said.

The Treasurer also is a PERA beneficiary. “I would opt out so that I’m not conflicted. People on the board should opt out of benefits until the system is truly fixed,” Stapleton said.

“The Treasurer’s job is as large or as small as the occupant,” Stapleton said. He would be an activist, he said.

“The Treasurer has a platform that can be used to pressure legislators to do the right thing. An active treasurer would come up with a plan to fix PERA. And an effective state treasurer would be talking to legislators about fixing the board of PERA and bringing more objectivity to the pension plan,” he said.

In addition to serving on PERA’s board, the Treasurer supervises the department’s investment managers.

Stapleton said that he earned his investment spurs when he made profitable investments during the Internet bubble of the late 1990s. He believes that his experience as an investor is transferable to the Treasurer’s job.

While his private investments can’t be checked, he is CEO of the publicly-owned commercial real estate company, Sonoma West Holdings Inc. (SHWI.PK). Its results are posted on for all to see.

And even though the company is small with revenues in the fiscal year that ended June 30, 2009 at $3.65 million and the market capitalization at about $10 million, the California company’s profitability is spectacular. The company’s return on assets was 16.73% while its return on equity was 287%.

“Of all the candidates running, I’m uniquely qualified to handle the job. I’m the only candidate who has an MBA and a graduate candidate in economics. I’m only candidate who has applied that education running businesses and serving as chief executive, investment and financial officer of various companies. The the skill sets I’ve picked up are extremely valuable for Colorado’s collective tax dollars at the Capitol. Nobody running for the office has the eduction or business experience that I have,” Stapleton said.

And, he continued, “I was the chief acquisition officer and investment and acquisitions officer for a $500 million family owned company. The principles of investing in real estate and bonds are the same. Diversify risks and a multitude of asset classes. Somebody who has investment experience has investment experience.”

What is the incumbent Democrat Treasurer, Cary Kennedy, doing with investments for the state that you would change? I asked.

“I think the portfolio hasn’t changed markedly since Mike Coffman was Treasurer,” Stapleton replied, adding, “She’s been doing a decent job, getting ok returns. I wouldn’t try to recreate the wheel and rip up the state’s investments and start from scratch. I would look for spots of vulnerability and outside risks. The information is readily available in terms of ratings and performance records of assets.”

Without being asked, Stapleton commented on Hasan’s charge that Kennedy has invested irresponsibility in what he calls “bailout” companies that took cash infusions from the Federal government and paid those funds back with interest.

“I know there has been an outcry about bailout companies. I don’t think that charge is responsible. Some financial companies were forced to take Troubled Asset Relief Program (TARP) money and have paid it back. Some offer great returns and the state shouldn’t forego those returns. Because of bailouts that have occurred the companies are fully solvent. Look at the entire portfolio and seek the best risk adjusted return for the taxpayer’s money,” Stapleton said.

Sonoma’s filing with the Securities Exchange Commission last year includes this biography:

Walker R. Stapleton, 35; Director, President, Chief Executive Officer and Chief Financial Officer. Mr. Stapleton was appointed President and Chief Executive Officer on June 16, 2005 and became Chief Financial Officer in October 2005. Mr. Stapleton is a consultant with Castle Keep Realty of Denver, a private real estate consulting firm. From 2004 to 2005, Mr. Stapleton served as Director of Real Estate Acquisitions for Lamar Companies, a private real estate investment firm. From 2001 to 2003, he attended the Harvard Business School. From 1999 to 2001, Mr. Stapleton served as Director of Business Development for Live, a streaming media company on the internet. Mr. Stapleton gained transactional experience relating to public and private company financing during his employment at Hambrecht & Quist as an Investment Banker in the group’s technology banking division from 1997 to 1999. Mr. Stapleton was a founding principal of Convergence Capital Partners, a private real estate opportunity fund, which made investments in Eastern Europe. Mr. Stapleton is a graduate of Williams College, and holds a Graduate Degree in Business Economics from The London School of Economics and Political Science. Mr. Stapleton holds a Masters in Business Administration from the Harvard Business School.

As of June 30, 2009, Stapleton beneficially owned 10%, or 127,410 of the common shares of Sonoma West. At $8 a share, the holdings are valued at $1,019,280.

UPDATE: The company’s proxy statement shows the company is 48.6% owned by Walker and his family, including his cousins. His father owns 21.1% of the common shares and owns and shares the dispositive and voting powers of 48.6% of the shares, including the 8.9% of the shares owned by his wife and the 10% of the shares owned by Walker Stapleton, their son. Thus, Walker and his parents own 40% of the company’s voting shares and cousins own another 8.6%. If you look at Sonoma West’s proxy statement, it looks like the family owns close to 67% of the shares. But the footnotes show they own and share voting control of a total of 48.6% of the shares. The proxy statement is not clear if you don’t read the fine print. I apologize for not understanding and reporting on the footnotes the first time I read them.

Stapleton is paid a base salary of $210,000 by Sonoma West. In fiscal 2009, he was paid an incentive bonus amounting to $185,555 and other compensation of $35,511, bringing his total compensation for 2009 to $431,066, up from $385,469 in fiscal year 2008, according to the proxy statement. He doesn’t have a contract with the company.

Stapleton said that he spends about half of his time on Sonoma West’s business and the other half of his time on his other real estate investment businesses.

Stapleton said he is a fourth generation Coloradan. While he grew up in Riverside, CT, he spent a lot of vacation time in Colorado while he was growing up, and his family owns land on the Front Range. “My grandmother has lived in same house for 60 years. We’ve always had a large family connection and presence here.” He and his family moved to Colorado more than seven years ago.


Stapleton for Colorado State Treasurer.


Interview Part 1: J.J. Ament says he would de-politicize Treasurer’s office, eliminate losses, defend TABOR. The Business Word, 2.7.2010


Interview: Ali Hasan says that as state Treasurer, he’d invest in more Colorado-based companies. The Business Word, 1.17.2010.


Ritter signs PERA pension plan changes into law. By Patrick Malone. 


Colorado PERA


J.J. Ament Colorado State Treasurer.


Ali Hasan for Colorado State Treasurer.


The Political Education of Ali Hasan May Include a Run for State Treasurer.  


Cary Kennedy for State Treasurer.

Sonoma West Holdings (SWHI.PK).

Sonoma West’s key statistics. Yahoo.

Sonoma West Holdings Inc. 10K annual report for Fiscal Year ended June 30, 2009. 

Proxy Statement for Sonoma West Holdings.

Tipitina’s Foundation.

Denver Public Library Friends Foundation

 I do not have a candidate in this race.

Posted by Donald E. L. Johnson on 02/24/2010 at 10:32 PM

ColoradoInterviews, Audience Questions, AnswersPoliticsPPC

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