Tag Archives: Ken Cuccinelli

Cuccinelli to North Carolina on Electricity Regulation – Avoid Virginia’s Mistakes

The Cooch is back. Former Virginia Attorney General Ken Cuccinelli penned an op-ed for the Wilmington, North Carolina based Star News opposing Duke Energy’s proposed changes to electrical regulation.  The title of the opinion piece is, “N.C. should block this Duke Energy power grab”.  Cuccinelli’s biggest issue with the pending regulation is extending the period of time between utility rate cases.  The editorial board of the Star News agrees. Cuccinelli writes:

“Key provisions to extend the period of time between utility company rate cases are embedded within N.C. Senate Bill 559, being debated at the N.C. General Assembly. Similar provisions hurt Virginia customers, and will hurt North Carolina customers, too.”

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Dulles Toll Road Transfer to MWAA Perfectly Legal, the Cooch Advises

Ken Cuccinelli: What can he do? The law's the law.

by James A. Bacon

Del. Robert G. Marshall, R-Manassas, probably did not get the answers he hoped for when he asked for an advisory opinion from Attorney General Ken Cuccinelli on matters pertaining to the Metropolitan Washington Airports Authority (MWAA). Cuccinelli has gone on record opposing the Rail-to-Dulles project administered by MWAA as a boondoggle. But he did not let that sentiment sway him in his interpretation of the law.

Specifically, Marshall asked whether former Gov. Tim Kaine had acted legally in 2006 when he granted the state’s interest in the Dulles Toll Road to MWAA, in the absence of concurrence by the General Assembly, to provide a funding mechanism for Metrorail extension. Further, Marshall asked if both parties to the interstate compact creating MWAA, Virginia and the District of Columbia, had to amend the compact in order for MWAA to legally take possession of the toll road.

Although the question has not been conclusively resolved, said Cuccinelli in a letter written last week, he believes that the governor was authorized to make the transfer. Stated the AG:

The only court to consider this question concluded that the transfer of the Commonwealth’s interest pursuant to the MOU was permissible. Therefore, although there is no precedent from the Supreme Court of Virginia delineating the precise authority of the Governor in this context, the Governor’s actions were upheld in a court of law.

Furthermore, Cuccinelli said, there was no need to amend the interstate compact. “The approval of MWAA’ s Board would be sufficient to confer upon MW AA the authority and responsibility to operate and maintain the Dulles Toll Road.”

Addressing other questions posed by Marshall, Cuccinelli advised that Virginia would not bear any liability should MWAA default on its bond obligations, and that MWAA, as an interstate compact, was not subject to either the federal nor the state Freedom of Information Act laws. “The MWAA Compact does not specify that one or both of the freedom of information statutes applies to MWAA,” he wrote.

Cuccinelli’s ruling, coming as it does from someone unsympathetic to the Rail-to-Dulles project, should pretty well quell any speculation that Kaine’s 2006 transfer was unlawful. What’s done cannot be undone. There’s no point in beating that horse, which is so dead that it’s been shipped to the glue factory.

However, the lack of an effective FOIA law governing MWAA is clearly a flaw in the authority’s governance structure. The only way to deal with that, however, is to amend the interstate compact. It’s a long and tedious process to get approval from both Virginia and D.C., but that’s the way it goes. The McDonnell administration should initiate that change. It won’t make a difference while McDonnell is in office, but Virginia citizens will appreciate the greater transparency in years to come.

Cuccinelli: Not a Single Penny for Phase 2

Speaking of the Rail-to-Dulles fiasco… Attorney General Ken Cuccinelli reiterated his opposition to the Metrorail expansion last week and predicted that the General Assembly would spurn a McDonnell administration request for an extra $150 million state contribution needed to refinance Phase 2 of the controversial project.

“I would oppose putting a single penny of state dollars to bail out Phase 2,” he said, according to the Washington Times. “I hope that legislators will not agree to spend the $150 million.”

A General Assembly refusal to kick in the $150 million would collapse a fragile deal brokered by U.S. Transportation Secretary Ray LaHood to cut costs and otherwise limit exposure to users of the Dulles Toll Road. The original financing deal called for contributions from Fairfax County, Loudoun County and the Metropolitan Washington Airports Authority, with the balance to be paid by revenues from Dulles Toll Road. But as estimated costs ballooned from $2.8 billion to $3.8 billion, creating the prospect of $20 tolls within a couple of decades, political resistance flared in Fairfax and Loudoun.

Cuccinelli raised the prospect that the Loudoun Board of Supervisors, which has approved the LaHood deal, could reverse its position if the newly elected board  reconsiders the issue. He also said that the $150 million contribution would be a hard sell in a General Assembly looking for ways to close a $1 billion budget gap. “If I had to predict, I’d bet against.”

Given Cuccinelli’s popularity among conservative Republicans, these comments won’t make it any easier for McDonnell to squeeze the money out of the General Assembly. It may be time to dust of those Bus Rapid Transit plans!


The weak suit that could undermine challenges to the health care law

By Norm Leahy

Ken Cuccinelli is worried.

It’s not a familiar feeling for Virginia’s Attorney General. Mid-way through his first term in office, Cuccinelli has translated his firm conservative beliefs into a series of court cases challenging what he, and his supporters, sees as federal government excesses. So often has he taken the feds to court that Cuccinelli can joke about how many Obama Justice Department officials he knows.

But what has Virginia’s otherwise confident top lawyer concerned isn’t one of his court challenges, but a case rising out of the 6th Circuit Court of Appeals. In late June, a divided appeals court upheld the individual mandate that’s at the heart of the President’s health care law. But it’s more complicated than that. As Cuccinelli explained to me in an interview, Judge Jeffrey Sutton, appointed to the bench by George W. Bush, decided that the way the health care law is constructed might make it unconstitutional sometimes, but not in this particular case. Cuccinelli said that “This ruling is so narrow that I don’t know how much impact it’s going to have on other courts.”

But it was the first appellate court to rule in any of the 30 lawsuits currently pending against the health care law. Cuccinelli’s own case, Virginia v. Sebelius, was argued before the 4th Circuit Court of Appeals in Richmond three months ago.

The plaintiffs in the 6th Circuit case, the Thomas More Law Center and a group of individuals challenging the mandate, have filed an appeal to the United States Supreme Court. And that’s where Cuccinelli’s uneasiness begins.

“I am concerned about the 6th Circuit case because it has not been strongly argued by those plaintiffs.” Both the district and appeals court ruled against Thomas More’s challenge.

“For something this important, I’d like to see our side put its best foot forward,” Cuccinelli said. “I think we’ve demonstrated that we’ve got the best legal argument (in the Virginia case), and I’m comfortable with what’s come out of the Florida case in the 11th Circuit.

He should. Last week, the 11th Circuit Court of Appeals ruled that the individual mandate at the heart of the health care law was unconstitutional. At the same time, though, the court refused to invalidate the entire law. Federal District Court Judge Roger Vinson did just that earlier this year. Last December, District Court Judge Henry Hudson, who presided over the Cuccinelli lawsuit, held the individual mandate unconstitutional, but, like the 11th Circuit Court of Appeals, let the rest of the health care law stand.

There is one area where even courts siding with the Obama administration have been unanimous: none of them have bought the federal government’s argument that the financial penalty the law imposes on individuals for not buying health insurance is permissible under the Constitution’s grant of taxing power.

“Even Judge Sutton didn’t go along with that. And really, it’s at the core of our case, too, this notion that the federal government can basically force you to buy anything it deems necessary and impose a financial penalty on you if you don’t.”

Cuccinelli told me it’s possible the Supreme Court could ignore the appeal of the 6th Circuit ruling and wait until more appeals courts, like the 11th, have weighed-in. It’s also possible, he said, that the high court could take the 6th circuit appeal and then “reach down into the other appeals courts” and bring all the cases before it. Or it could have them run in parallel, or even decide to take them one at a time. “Nobody knows what they might do,” he said.

How might the Supremes rule? That’s another unknown. But when I asked Cuccinelli to address the calls on the right for Justice Elena Kagan, the former Obama administration Solicitor General, to recuse herself from any health care case that might reach the high court, he said there’s no indication she will do so. Earlier in the Virginia lawsuit, Cuccinelli’s office filed an appeal with the Supreme Court to take the case directly, skipping the court of appeals. The Supreme Court declined, but in doing so, Kagan made no move to remove herself from considering Virginia’s petition. That strongly indicates she will also be on the bench when a health care suit reaches the Supreme Court.

Cuccinelli expects a ruling “literally any day now” on the Virginia lawsuit and he stated that if he loses, he will appeal that “rather promptly” to the Supreme Court.

Forget FOREX, VRS’ problem is with active management

by Norm Leahy

The headline news is that Virginia and Florida are suing Bank of New York Mellon for “…cheat[ing] pension funds in those states by choosing improper prices for currency trades the bank processed for the funds.

But the real headline story that, so far, I’ve only seen posted here, is how Virginia’s public employee retirement system is paying handsomely — with retirees’ money — for investing in actively managed funds:

The Virginia Retirement System, or VRS, pays millions to Wall Street, as well as highly-paid internal managers, to oversee its $55 billion fund. The state paid $125 million more to fund managers in 2010 than it did in 2005, when the system first embraced a “more active” investment strategy. The strategy yielded results in 2011, as the fund grew nearly 20 percent, still $3.4 billion short of its pre-recession high.

The fund needs a 49 percent gain to make up for recession losses.

“The reason the fees are so high is because 89 to 90 percent of our investments are under active management,” VRS Director Bob Schultze said. “We have to go to outside firms that put out all of these results.”

This feeds into an old debate: whether actively-managed funds perform better over the long term than index funds:

The VRS could achieve similar long-term investment gains with an index fund, a computer generated investment scheme designed to react to market trends, according to Andrew Biggs, a retirement scholar at the conservative American Enterprise Institute.

“The whole point of active management is to try and outsmart the market,” he said. “But 75 percent of the time, active managers don’t beat the index funds. You can’t outsmart the market.”

Some large index funds have been able to churn out results similar to the system’s performance.

I remember having a long-running argument argument with the retirement fund managers at a former employer. They weren’t keen on index funds, preferring to stick with actively-managed funds that carried higher fees.

So I asked for information on the active funds’ holdings. When that data was provided, it was not surprising to find that funds which, by their names alone, would seem to have vastly different investment goals also tended to own shares in the same companies. But we could only see what the top ten holdings were — in the past. A complete list of current holdings was unavailable, nevermind how long those holdings had been in the portfolio. And tax considerations? Fuggedaboutit.

So what did active management provide? The promise of greater returns, but rarely greater than the index used as a benchmark. And at a far higher price, with less diversity, than those same benchmark index funds. But the idea that smart people were watching the market like a hawk every day, as opposed to a dumb index that just sat there, gave some of my colleagues great comfort.

It’s the same with the VRS. The state’s retirement plan took a huge hit coming out of the 2008-2009 market swoon. They turned to active management to try to cover the losses because they believed the smartest guys in the room would give them an edge. But that move has cost them a great deal — arguably, far more than the monies in question in the suit pending against Bank of New York Mellon.

So why does the VRS stick with active managers that cost a heckuva lot more? Sen. Roscoe Reynolds offers the classic response:

“If something went wrong, could you imagine the response from the public if we were relying on a computer? I can tell you it wouldn’t be good.”

Is SkyNet running the Russell 2000? Or the Wilshire 5000? Not yet. But there’s also no indication that the bright minds behind active investment strategies — and the costs they bring — do any better than the far cheaper, and in many ways far smarter, index approach.