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Saying he feared it would become a "highly partisan affair," John Petersen III on Friday withdrew his nomination to the State of Wisconsin Investment Board.

Petersen told Gov. Scott Walker's appointments aide on Friday that he was removing his name from consideration after ethical questions were raised about his past service on the board. SWIB manages $83.1 billion for the state retirement system, which includes state and municipal employees, public school teachers and other workers.

"Although I looked forward to serving on the Board, I have no wish to serve under these circumstances," Petersen wrote in an email to Eric Esser on Friday afternoon.

Petersen told a state Senate committee on Wednesday that he was "probably the most experienced person available" for the position. But the five-member Senate Committee on Financial Issues and Rural Affairs, particularly Sen. Kathleen Vinehout (D-Alma), grilled him about concerns a state auditor raised in 2001 when he previously served on the board.

The audit questioned what it called an "appearance of a conflict." Petersen voted in 2000 to have SWIB invest $80 million in a business with ties to a company in which he owned stock.

Petersen, a Madison real estate developer whose son Eric is a well-connected lobbyist, was a SWIB trustee for a 10-year term ending in 2003. Walker's nomination of him to return to the board drew criticism from the former head of the investment board.

David Mills, SWIB's retired executive director, said Tuesday that Petersen was "over-involved" in investment decisions at SWIB and was vice chairman of the board at a time when it had serious governance issues.

"Public employees, educators, Investment Board staff and ultimately the citizens of Wisconsin will be better served with another individual with solid credentials but none of the lingering ethical and governance questions associated with John's past tenure," Mills said.

Petersen owns office and apartment buildings in Madison on his own and through partnerships, and manages stock investments for his family through a family office called Inland Investment Co. Inc., according to statements filed with the state's Government Accountability Board. He did not return a phone message seeking comment.

SWIB trustees are paid a minimal fee, but get the prestige associated with an organization that runs the ninth biggest public pension fund in the country and the 30th biggest public or private pension fund in the world.

Sen. Julie Lassa (D-Stevens Point) praised Petersen's decision, saying he was "doing the right thing." Lassa said she hoped that any future nominee to the board would be qualified and knowledgeable about when it was proper to recuse himself or herself because of possible conflicts.

Vinehout said she was pleased by the news and would look forward to a new nominee.

There are many experienced investment industry people with strong emotional ties to the state who would be willing to serve as trustees, said Mark Fedenia, associate professor of finance at the University of Wisconsin-Madison and former director of the school's Applied Securities Analysis Program, which has trained money managers and analysts who went on to work at some of the world's biggest investment firms.

"Nothing goes on on Wall Street without SWIB being in that loop, so you would want someone who has seen and done all those things to be putting forth policies and suggestions," Fedenia said. "Those people have done it on a scale like SWIB, and you want SWIB staff to be able to draw on their experience."