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Matt Dietrich
By Matt Dietrich December 29, 2017

Joe Berrios fails to lock down timeline in Kaegi prison charge

In a recent cable TV ad, Cook County Assessor Joseph Berrios accused his Democratic primary opponent, Fritz Kaegi, of profiting from the private prison industry during his tenure as an investment analyst at Columbia Wanger Asset Management.

"Kaegi personally managed a fund that invested nearly $30 million in private prisons," the ad stated. "Prisons where women refused food to protest abusive guards, immigrant children as young as 5 were held and detainees died suspiciously. But Kaegi only saw profits." Berrios also aired a similarly worded radio ad.

The for-profit prison industry has long been the focus of animus for Democrats nationally, and the very concept of private prisons has been a source of controversy generally, so connecting Kaegi to it could score political points for Berrios.

Investment funds like those managed by Kaegi contain dozens of stocks covering a diverse array of industries. We took a look to see if private prisons were in the portfolio on Kaegi’s watch.

Timeline trouble

Kaegi spent 13 years as an investment manager at Columbia Wanger Asset Management, where he oversaw the Columbia Acorn Fund with two other analysts. He gave up management duties of the fund and left Columbia Wanger on March 13 to begin his campaign.

Our first call was to the Berrios campaign to find out the basis for the ad’s allegation. Campaign spokeswoman Monica Trevino provided a quarterly Securities and Exchange Commission filing from March 31 that showed the Columbia Acorn Fund contained 926,513 shares in CoreCivic, a Nashville-based company that manages 91 prisons and related facilities across the country. The shares are valued at $29,111,038, according to the filing.

Trevino also sent an amendment to the Columbia Acorn prospectus dated March 13 that showed Kaegi’s oversight of the fund would end on March 14. Because the quarterly report includes time when Kaegi was one of three managers of the fund, he’s connected to the CoreCivic investment, Trevino said.

"Kaegi has not (provided) any definitive evidence that when the investment was made he wasn’t there," Trevino said in an email.

Virtual paper trail

Interestingly, Kaegi provided the same March 13 document in defending himself. He said it shows he was not active in the fund’s management after that date and that CoreCivic and other stocks were added to the portfolio between March 14 and March 31.

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Kaegi explained he ran the fund with two other managers — lead portfolio manager Matthew A. Litfin and co-manager P. Zachary Egan — and no investments were made without agreement from all three.

"If one person was against buying, you didn’t buy," Kaegi said. Kaegi consistently had blocked investment in CoreCivic and a few other stocks, but that ended when he stepped down as manager on March 13, he said. Neither Litfin nor Egan responded to our requests for comment.

"I always thought these were bad companies" that "try to dress themselves up as real estate companies," said Kaegi, adding that he believes changing attitudes on mass incarceration make private prison stocks a risky investment. That’s in addition to ethical concerns over privatizing correctional facilities, he said.

In a press release issued shortly after Berrios’ ad appeared, Kaegi’s campaign provided links to all of the fund’s quarterly reports from 2015 and 2016, none of which show CoreCivic (or Corrections Corporation of America, as it previously had been known) among its holdings.

Kaegi also produced a summary from Feb. 28, 2017 — just two weeks before his management ended — that does not show CoreCivic among Columbia Acorn Fund’s holdings.

"This is just about the most controversial stock you can imagine," Kaegi said. "Why on earth would I do that when I’m about to step down to run for this office?"

A comparison of the Feb. 28 summary and the March 31 quarterly report shows several stocks — Bioverativ, Blackline, Brunswick Corp., Copart, CoreCivic, Credit Acceptance Corp., Pool Corp., Q2, Tractor Supply and TransUnion — that were added after Feb. 28. Kaegi campaign spokesman DeRondal Bevly said TransUnion was the only stock that was added while Kaegi still managed the fund.

Our ruling

Berrios said his primary challenger "managed a fund that invested nearly $30 million in private prisons."

Columbia Acorn Fund, of which Fritz Kaegi was one of three managers, reported $29.1 million in stock of the private prison operator CoreCivic on its March 31, 2017, quarterly report.

But Kaegi’s active management of the fund ended March 13, as documented in a Securities and Exchange Commission filing. Kaegi said the CoreCivic investment came after he was gone, and points to two years of quarterly reports and a Feb. 28 holdings summary to back his point.

We were unable to confirm from Kaegi’s co-managers, but a scenario in which Kaegi during his final two weeks as a fund manager decides to invest in a controversial private prison stock as a last act before challenging an opponent in a Democratic primary in Cook County borders on absurd.

Berrios’ statement contains an element of truth — the quarterly report on March 31 shows a $29.1 million investment in CoreCivic. But it ignores the critical fact that Kaegi didn’t manage the fund as of March 14 and that as recently Feb. 28 CoreCivic was not part of the portfolio. We rate it Mostly False.

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Mostly False
"(Fritz) Kaegi managed a fund that invested nearly $30 million in private prisons."
Monday, December 11, 2017

Our Sources

Joe Berrios’ new radio ad features Jesse White, more attacks on Kaegi, Capitol Fax blog, Dec. 15, 2017; accessed Dec. 18, 2017

Berrios runs TV ad attacking Democratic primary opponent Kaegi, Capitol Fax blog, Dec. 11, 2017; accessed Dec. 18-27, 2017

Email/phone exchange, Monica Trevino, Committee to Elect Joseph Berrios Assessor, Dec. 18, 2017

Quarterly schedule of portfolio holdings, Columbia Acorn Trust, March 31, 2017; accessed Dec. 18, 2017

LinkedIn profile, Fritz Kaegi, accessed Dec. 18, 2017

Acorn Fund Holdings as of Feb. 28, 2017, Securities and Exchange Commission filing, accessed Dec. 23, 2017

Columbia Acorn Fund portfolio as of Dec. 31, 2016, Securities and Exchange Commission filing, p. 43, accessed Dec. 26, 2017

Supplement to the prospectus, Columbia Acorn Fund, Securities and Exchange Commission, March 13, 2017; accessed Dec. 26, 2017

Columbia Acorn USA portfolio as of Dec. 31, 2016, Securities and Exchange Commission filing, page 56; accessed Dec. 26, 2017

Telephone interviews, Fritz Kaegi, Dec. 22, Dec. 26, 2017

Email exchanges, DeRondal Bevly, communications director, Fritz Kaegi for Cook County Assessor, Dec. 23-28, 2017

America's Private Prisons Are Back in Business, Bloomberg Politics, Jan. 10, 2017; accessed Dec. 26, 2017

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Joe Berrios fails to lock down timeline in Kaegi prison charge

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