Texas Comptroller Susan Combs said last week that the Texas Treasury Safekeeping Trust Co. lost $19.5 million it had invested with a hedge fund that placed the funds in a phony investment scheme operated by convicted swindler Bernard Madoff.

Combs said the state had been investing with the Texas-based Austin Capital Safe Harbor fund since 2006.

The Treasury Safekeeping Trust, which is chaired by Combs, manages $50 billion in tobacco lawsuit settlement funds, as well as TexPool investments for 2,000 local governments and the Treasury Pool of state funds.

A report issued by the state trust in March listed $205 million in investments with Austin Capital, but did not mention any losses. The state disclosed the losses after questions were raised by newspapers in Houston and San Antonio.

Comptroller spokesman R.J. DeSilva said state officials are monitoring lawsuits against the hedge fund and parent company KeyCorp to determine if Texas can be part of a class-action lawsuit on behalf of investors.

Union pension funds in New Mexico, New York, and Pennsylvania have filed suit against Austin Capital to recover lost funds, but DeSilva said state law prohibits the agency from joining lawsuits filed by labor unions.

The lawsuits filed by a New Mexico teachers union charges that state’s Educational Retirement Board and State Investment Council lost between $23 million and $25 million through investments with Austin Capital.

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