Pension Scandal Now Includes 36 Attorneys General
From John Curry, May 8, 2009
"California Attorney General Jerry Brown is one of 36 attorneys general from around the country who have agreed to participate in a task force that Cuomo organized to fight pension-fund abuse."
Editorial: Pension scandal migrates west
The Sacramento Bee, May 8, 2009
State and local governments, now bracing for expected big increases in the bills for their retirement funds, should keep a close watch on the unfolding national investigation of corruption in public pension funds.
The probe began in New York two years ago when state Attorney General Andrew Cuomo teamed up with the Securities and Exchange Commission to begin looking into alleged bribery, fraud and kickbacks involving that state's pension fund. At $122 billion, it's the third-largest such fund in the country.
Cuomo has filed several criminal indictments in his probe so far. Most involve pay-to-play schemes in which so-called "placement agents" are alleged to have paid public officials to steer pension-fund money to certain investment firms.
California Attorney General Jerry Brown is one of 36 attorneys general from around the country who have agreed to participate in a task force that Cuomo organized to fight pension-fund abuse.
In recent weeks, the investigation has drifted west to California. That is hardly surprising.
This state is home to the country's largest and second- largest public pension funds, the California Public Employees' Retirement System, or CalPERS; and the California State Teachers' Retirement System, or CalSTRS. Two of the firms under scrutiny by Cuomo are headquartered in California: Gold Bridge Capital LLC of San Francisco and Wetherly Capital Group of Los Angeles.
As The Bee's Dale Kasler reported this week, the two firms represented money management companies that secured $525 million in investments from CalPERS and CalSTRS since 2004.
Spokeswomen for the California pension funds downplayed the significance of placement agents in influencing investment decisions.
Nonetheless, last week, California Treasurer Bill Lockyer, a member of both the CalPERS and CalSTRS boards, sent letters to top officials at the two pension funds requesting that they "review any prior or pending … deals involving investment managers and/or placement agents identified in indictments filed" in New York.
He also asked the pension-fund staffs to provide a list of the "identities, fees paid and services provided by placement agents seeking" pension fund investments and to make their findings public to the extent possible.
Finally, Lockyer has asked the retirement boards to consider requiring placement agents to register and disclose their clients, a system of disclosure much like the one currently in place for lobbyists who contact elected officials on behalf of clients.
CalSTRS and CalPERS combined have lost more than $100 billion in the last 18 months. It will be difficult, if not impossible, to determine the extent to which those losses can be attributed to imprudent investments pushed by placement agents.
Still, the information the treasurer seeks will go a long way toward creating the kind of openness and transparency that retirement fund managers have long demanded from corporations in which they invest.
It will also provide reassurance to taxpayers who must back-fill pension funds when investment returns falter, as they have spectacularly this year.
"California Attorney General Jerry Brown is one of 36 attorneys general from around the country who have agreed to participate in a task force that Cuomo organized to fight pension-fund abuse."
Editorial: Pension scandal migrates west
The Sacramento Bee, May 8, 2009
State and local governments, now bracing for expected big increases in the bills for their retirement funds, should keep a close watch on the unfolding national investigation of corruption in public pension funds.
The probe began in New York two years ago when state Attorney General Andrew Cuomo teamed up with the Securities and Exchange Commission to begin looking into alleged bribery, fraud and kickbacks involving that state's pension fund. At $122 billion, it's the third-largest such fund in the country.
Cuomo has filed several criminal indictments in his probe so far. Most involve pay-to-play schemes in which so-called "placement agents" are alleged to have paid public officials to steer pension-fund money to certain investment firms.
California Attorney General Jerry Brown is one of 36 attorneys general from around the country who have agreed to participate in a task force that Cuomo organized to fight pension-fund abuse.
In recent weeks, the investigation has drifted west to California. That is hardly surprising.
This state is home to the country's largest and second- largest public pension funds, the California Public Employees' Retirement System, or CalPERS; and the California State Teachers' Retirement System, or CalSTRS. Two of the firms under scrutiny by Cuomo are headquartered in California: Gold Bridge Capital LLC of San Francisco and Wetherly Capital Group of Los Angeles.
As The Bee's Dale Kasler reported this week, the two firms represented money management companies that secured $525 million in investments from CalPERS and CalSTRS since 2004.
Spokeswomen for the California pension funds downplayed the significance of placement agents in influencing investment decisions.
Nonetheless, last week, California Treasurer Bill Lockyer, a member of both the CalPERS and CalSTRS boards, sent letters to top officials at the two pension funds requesting that they "review any prior or pending … deals involving investment managers and/or placement agents identified in indictments filed" in New York.
He also asked the pension-fund staffs to provide a list of the "identities, fees paid and services provided by placement agents seeking" pension fund investments and to make their findings public to the extent possible.
Finally, Lockyer has asked the retirement boards to consider requiring placement agents to register and disclose their clients, a system of disclosure much like the one currently in place for lobbyists who contact elected officials on behalf of clients.
CalSTRS and CalPERS combined have lost more than $100 billion in the last 18 months. It will be difficult, if not impossible, to determine the extent to which those losses can be attributed to imprudent investments pushed by placement agents.
Still, the information the treasurer seeks will go a long way toward creating the kind of openness and transparency that retirement fund managers have long demanded from corporations in which they invest.
It will also provide reassurance to taxpayers who must back-fill pension funds when investment returns falter, as they have spectacularly this year.
posted by Kathie Bracy at 9:13 PM
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