Charlie Baker Backs Away From… His Job?

After losing his 2010 gubernatorial bid, Charlie Baker took a job with General Catalyst Partners in Harvard Square, where, under the title “Entrepreneur in Residence”—sometimes called “Executive in Residence” and thus “XIR” to the cool kids—he sought out investment opportunities for the venture capital fund. He did that for about two and a half years or so, and still holds the position, but is on leave while he runs for governor again.

But yesterday, the Baker campaign seemed to distance Baker from General Catalyst, in a piece by David Sirota at Pando Daily.

The Sirota article suggests that if Baker was an actual executive, investment professional, or employee of General Catalyst, there would be an unseemly and possibly illegal connection between a large contribution from Baker to New Jersey Governor Chris Christie and a public pension contract given by New Jersey to General Catalyst.

I don’t know about that; what I do know about is the much more obvious unseemly but perfectly legal connection not mentioned by Sirota. Christie is chairman of the Republican Governors Association (RGA) for the 2014 election cycle, a role in which he will spend lots and lots of money to help Baker win his election.

That’s why Baker helped organize and appeared at a reported $1 million RGA fundraiser in late February of this year with Christie (originally scheduled at the home of New Balance’s Jim Davis, but moved to the Lenox when Christie’s Washington Bridge scandal drew unwanted attention). Basically, that’s all money being donated to Baker’s election.

Whether the contribution was illegal from the Securities and Exchange Commission’s perspective is trickier, and seems to rest on what Baker’s exact function and relationship was with General Catalyst—and that leads into the strange world of how wealthy people make money, which is not always the way you and I do.

You see, Baker never really worked for General Catalyst, and General Catalyst never really employed Baker. The way these venture capital XIR things often work is that people with lots of money (the VC firm) enter into a “relationship” with a person with connections or expertise (the XIR), which doesn’t actually involve any remuneration or any business interaction whatsoever. Occasionally the XIR tells the VC firm, “Hey, you should check out this company I like.” Then at some point the VC firm calls up and says, “Hey, we’ve made a major investment in TearScience (which may be one of the ones the XIR suggested, or not) and we’re gonna stick you on its board of directors.” Next thing you know, Charlie Baker is a TearScience director, loading up on its stock while looking out for the financial interests of the VC investors. Win-win.

Baker was in fact placed on the board of TearScience; he was also put on the board of a health insurance company called Oscar, based in New York; and he was made chairman of the board of Oceans Health Care in Louisiana. He did all this not for any remuneration by General Catalyst, but as his own entity (here, if for some reason you care, is the paperwork creating one of the two limited liability companies he formed for this purpose).

The tricky thing, for my interest, is whether Baker has misrepresented his work with General Catalyst in his campaign for governor. For example, here he is chatting with Globe columnist Shirley Leung about how his recent work will help him be the “tech governor.” There, and on the General Catalyst website, and elsewhere, he has come across as helping make the investment decisions at General Catalyst. Or, at least, identifying investment opportunities and advising General Catalyst on them.

Here is how the Baker campaign describes Baker’s role with General Catalyst to me today:

Charlie’s relationship with General Catalyst is as Entrepreneur-in-Residence or XIR. The XIR program enables entrepreneurs, executives and CEOs to work with the firm to identify potential investment opportunities in the XIR’s areas of expertise. Charlie is one of 10 XIRs at GC.

As an XIR, Charlie is not an executive, an employee or an investment professional of General Catalyst. XIR’s form their own company, the goal of which is to startup a business or invest in an existing business, and General Catalyst provides seed capital, office space and administrative support to the XIR.

Charlie is not involved in advising or managing the General Catalyst funds with regard to their investments, so he is permitted to make political donations to state and local candidates.

So Baker’s job was to “identify potential investment opportunities” for General Catalyst and serve on the boards of those campanies, none of which counts as being “involved in advising or managing” the investment.

That’s about right. I’m suddenly a lot more curious about what Baker actually did and how much money he made, but I don’t see that Baker has done anything wrong here. Like many people in his circles, he has spent the past few years making lots of money by using his connections and experience to be placed on boards that he probably has to fly out to a few times a year.

It’s good work if you can get it—and before Massachusetts Democrats start hitting him for it, I would suggest that the odds are very, very good that Deval Patrick will do something similar in, oh, about eight months’ time.