Bowles's Luck: Or is it simply politics?(Erskine Bowles)

In what state attorney general Richard Blumenthal described as a "virtually unprecedented" move, the State of Connecticut sued the investment firm Forstmann Little for losing more than $100 million in pension funds of state workers. Suing over disappeared dough is nothing new, but this lawsuit has two highly unusual aspects.

First, the suit put the fear of God into general partners (GPs) at investment shops everywhere, because seven Forstmann GPs were separately named as individual defendants -- putting them personally on the hook for any resulting liability for making lousy investments that tanked. Second, and more important, one of the GPs -- someone who was present when all the bad investments were made, who was there while much of that cash evaporated, and who even sat on the board of one of two relevant companies that went bankrupt -- went unnamed.

Who was that mystery partner smiled on by Lady Luck? None other than Erskine Bowles, the multimillionaire former chief of staff for Bill Clinton and current Democratic candidate for the U.S. Senate in North Carolina. Bowles appears to have had more than luck in his corner. The two people responsible for filing the suit -- state treasurer Denise Nappier and Attorney General Blumenthal -- are both elected Democrats.

Like so many other scandals of late, Connecticut's dispute with Forstmann stems from faltering telecom investments. The two biggest bugaboos are the collective billions Forstmann poured into XO Communications -- where Connecticut lost its entire $95 million stake - - and McLeod USA, in which Connecticut lost 90 percent of its $31.4 mimillion piece of the pie.

Bowles disowns responsibility by saying, "I was there part-time on and off for a couple of years." He further notes that "over a 20-year period" -- when Bowles was not a Forstmann partner -- "[Forstmann Little] had a return on their investment of over 35 percent." Thus he embraces the period when he wasn't a partner and distances himself from the period when he was. Bowles's salary was $4.3 million a year -- a sizable chunk of change for a part-timer.

The two investments that have landed Forstmann in hot water, XO and McLeod, were both made in Bowles's time. And as a general partner, he would have been involved in significant decisions. Like many of their telecom brethren, XO and McLeod wrapped themselves in the cloak of bankruptcy protection, virtually eliminating the value of Connecticut's investments in them via Bowles's firm.

Forstmann placed Connecticut's millions into two existing funds in which the state was one of several investors. The investment was intended as a conservative addition to Connecticut's overall portfolio, and the state says it was banking on Forstmann's prudent reputation. The state's lawsuit claims Forstmann promised a cautious investment strategy, taking over management of most of the companies in which it invested.