Facebook lawsuit is not invalid by Bowles connection

Controversy is roiling over North Carolina Retirement Systems’ role as lead plaintiff in the class action lawsuit against Facebook and Morgan Stanley.

Critics of the system’s status as lead plaintiff argue that there is
a potential conflict of interest between it and Facebook. The conflict is due, they argue, to the financial and personal relationship between Erskine Bowles and N.C.
State Treasurer Janet Cowell.

Using the relationship between Cowell and Bowles as a justification
for calling for the system to step down as lead plaintiff is overblown. The community should direct its attention to the real issues addressed by the lawsuit.

Erskine Bowles is a board member of both Facebook and Morgan
Stanley, the investment bank that handled the Facebook initial public
offering. Cowell is a board member and sole trustee of the retirement system.

A fundraiser hosted at the Bowles’ household for Cowell’s campaign for State Treasurer on June 22 of last year is held up as an example of the close ties between Cowell and Bowles.

Opponents of the retirement system as the lead plaintiff argue that Cowell might not fairly represent the interests of the group of plaintiffs bringing the lawsuit, given her ties with Bowles.

However, if there was a conflict of interest, why would Cowell lead a lawsuit against someone with whom she has close ties?

Especially since it could cause Bowles potential financial losses.

Also, the investment firm for which Bowles is a senior adviser, Carousel Capital, was not directly involved in the system’s
purchase of Facebook stock. Instead, Sands Capital Management made the purchase.

The focus on the Bowles-Cowell relationship is misplaced. If the
lawsuit is eventually thrown out by the judge, it should not be for this reason.

The retirement system is leading the suit against Facebook and the
investment banks who handled the IPO after North Carolina lost more
than $4 million since Facebook’s public offering.

Other firms in the class action lawsuit had a $3 million!)_in_Facebook_lead_counsel_spat/ combined loss, which is much less than the system’s loss.

In class action lawsuits, the lead plaintiff is traditionally
the party that has lost the most money, justifying the retirement system’s bid for lead plaintiff.

Since the offering on May 18, Facebook’s share price has almost halved from $38 to less than $18.

Rather than focusing on the Bowles-Cowell connection, it’s much more
important to look at where the buck stops in this
financial decision. This conflict of interest debate is a distraction from the real issue of the lawsuit.

Focus should instead be on the shady dealings
between Morgan Stanley, Facebook and other investment banks that potentially led to the losses.

The class-action lawsuit is legitimate and the community should not call for the system to step down as lead plaintiff.

Cowell representing the state’s retirement system in leading the lawsuit against Facebook should challenge claims of a conflict of interest, rather than raise suspicions.

Since the system lost the most money, it ought to be the one leading the class action lawsuit.