Oregon Examines Spyware Investment Amid Controversy

The future ownership of an Israeli spyware company whose product has been used to hack into the cellphones of journalists, human rights workers and possibly even heads of state is up in the air.

Major investors in a private equity firm that has majority ownership of NSO Group, the maker of the Pegasus spyware, are in discussions about what action to take. The Oregon state employee pension fund is one of the largest investors, if not the largest, having committed $233 million to Novalpina Capital, the private equity firm, in 2017.

Novalpina Capital has been saddled with both an internal dispute among its founding partners and an explosive report showing NSO Group's spyware has been widely misused around the globe.

Oregon State Treasury spokeswoman Rachel Wray told The Associated Press in an email Wednesday the department is getting involved. State officials previously said investors have limited say in private equity investments once they are completed.

"I can confirm that, consistent with our fiduciary duties to Oregon beneficiaries, and along with other limited partners, (Oregon State) Treasury is involved in discussions related to our investment in Novalpina," Wray said Wednesday.

The development comes amid a serious disagreement among the three co-founders of London-based Novalpina Capital that, according to press reports from Britain, resulted in investors moving to strip control of the fund after concluding that relations between the three had deteriorated so much that they could no longer work together.

Sky News reported the dispute was about future deployment of Novalpina's 1 billion euro ($1.18 million) fund.

On top of that internal strife, an investigation published in July by the global media consortium Forbidden Stories showed that at least 180 journalists around the world have been selected as targets by clients of NSO Group. In one case highlighted by the Guardian, Mexican reporter Cecilio Pineda Birto was assassinated in 2017 a few weeks after his cellphone number appeared on a leaked list of more than 50,000 cellphone numbers.

French President Emmanuel Macron is one of several world leaders who may have been targeted using the spyware that is capable of checking a cellphone's emails and other data and turning on its microphone and cameras.

NSO Group denied that it has ever maintained "a list of potential, past or existing targets." In a separate statement, it called the Forbidden Stories report "full of wrong assumptions and uncorroborated theories."

The company insists it only sells to "vetted government agencies" for use against terrorists and major criminals and that it has no visibility into its customers' data. Critics have provided evidence that NSO directly manages the high-tech spying.

Oregon State Treasurer Tobias Read, who serves as the state's chief investment officer, "is following and (is) concerned about the reporting surrounding Novalpina and the NSO Group," Wray said.

Wray said she cannot get into specifics about the discussions among Novalpina's investors because of confidentiality restrictions and Oregon's obligations as a limited partner. Read declined an interview request.

Oregon was Novalpina's first major investor. Stephen Peel and Stefan Kowski, two founding Novalpina Capital partners, showed up at Oregon treasury offices in the Portland suburb of Tigard in November 2017 to make a pitch to the Oregon Investment Council, which oversees the state's $90 billion pension fund.

"As investors, we assume we have to be contrarian," Peel told the council. "We have to find deals that other people don't see or don't want to do for various reasons."

The Oregon Investment Council unanimously approved a $233 million commitment. It has so far provided to the fund $65.7 million, according to the most recent statistics. The Alaska Permanent Fund Corporation and England's South Yorkshire Pensions Authority invested $59 million and $33 million respectively.

In 2019, Novalpina Capital and the founders of NSO Group acquired a majority stake in NSO Group from another private equity firm, Francisco Partners, that the Oregon pension fund had previously invested in.

Novalpina's largest investors are now considering picking Berkeley Research Group to replace Novalpina, the Financial Times reported. If appointed, the California-based global consulting firm would be given a mandate to return investors' money by selling the three companies Novalpina owns, including NSO, for the highest possible price, the London newspaper said.

Berkeley Research Group did not respond to a request for comment. The group's website says it "helps leading organizations advance in three key areas: disputes and investigations, corporate finance, and performance improvement."