The pension scandal basically involves giving certain firms and players in the pension funds kickbacks for the right to manage portions of the funds’ resources. Essentially people who should have been protecting the fund were instead using their relationship to make money. It seems to be one of those stories where everyday you get some sort of minor revelation, and they seem to have these tangential relationships other noted figures, including Jerry Brown. Today, a former CalPERS board member is in the cross-hairs:
CalPERS has invested more than $1.4 billion with private equity firms that hired a former CalPERS board member to represent them.
Arvco Capital Research of Stateline, Nev., whose chairman, Alfred Villalobos, served on CalPERS’ governing board in the 1990s, calls itself one of the world’s top “placement agents” – and has been among the most successful at attracting investment business from the California Public Employees’ Retirement System. (SacBee 6/9/09)
Both CalPERS and CalSTRS now require money managers to disclose their relationships with any placement agents. However, this move really seems inadequate to the scope of the problem. The question is when will the drip-drip-drip of little pieces of information end? It is really quite tough to regulate against a moving target, as you may end up missing some of the bigger aspects of the scandal. But this problem is bigger than just California, NY’s AG Andrew Cuomo has the investigation that seems to be the most thorough at this point.
There is sure to be more from this one…
If you read Article 16, Section 17 of the CA Constitution, you will find that pension assets from which investments are made are sacrosanct, and may not be used for any purpose other than providing benefits for the covered Members. Note that it does NOT say: Pay benefits to middlemen, subsidize indirectly Elected officials campaign funds, or be used to fight for a specific political agenda.. The Pension Boards are fiduciaries and must abide by the rules of Pension Trusts as laid out by the IRS and State law. Why haven’t these “errant transactions” had sunshine placed on them? When does the Membership and the Taxpayer find out who is stealing their pension money, and what politician is gaining from it?
Believe me the bureaucracy and politicos will bury this information on the final pages of reports, refuse to release information, and obfuscate losses with actuarial mumbo jumbo to justify their positions. The Pension Boards and Staffs should be fired if not prosecuted.