SCANDAL ROCKS CALPERS: Boss Forced Subordinates To Pay Millions To Consultant Cronies

Business Insider ^ | 03/15/2011 | John Ellis

[SeekAndFind]

The Los Angeles Times breaks some major news this morning:

In a scathing report, a former chief executive of the California public employee pension fund was accused of pressuring subordinates to invest billions of dollars of pension money with politically connected firms.

A 17-month investigation also found that Federico Buenrostro Jr. — along with former pension fund board members Charles Valdes and Kurato Shimada — strong-armed a benefits firm to pay more than $4 million in fees to consultant Alfred J.R. Villalobos, who later hired Buenrostro.

The report, prepared for the California Public Employees' Retirement System by Washington law firm Steptoe & Johnson, comes amid widening attacks on public employee pension funds in California, Wisconsin, Iowa and other states for providing lavish benefits that cash-strapped governments can no longer afford.

The findings of insider dealings at CalPERS could provide fresh ammunition to Republican lawmakers here who want Democratic Gov. Jerry Brown to convert traditional pensions with guaranteed payments for life into 401(k)-type plans that rely heavily on employees' own contributions.

[dalebert]

Ouch. How did this get reported?

[kittymyrib]

Typical Mexican politics coming to a state near you, as the immigration invasion continues unabated.

[SeekAndFind]

MORE HERE:

CalPERS expected to cut forecast of portfolio profit
By Dale Kasler

http://www.sacbee.com/2011/03/10/3463392/calpers-expected-to-cut-forecast.html#ixzz1GgHeRSnc

EXCERPT:

In a move that could intensify the debate over retirement costs, CalPERS is considering cutting its official forecast of investment profits by a quarter of a percentage point.

While the change seems subtle, it has major implications for taxpayers and public employees. The less CalPERS assumes it will earn on investments, the more it’s likely to demand from taxpayers – probably tens of millions of dollars more.

The California Public Employees’ Retirement System already imposed a $400 million rate hike on the state this year to help it recover from huge investment losses in 2008.

Following months of study, CalPERS staff this week said the forecast should be shaved to 7.5 percent a year. It’s currently 7.75 percent.

“There appears to be a consensus that returns are expected to be lower … over the next 10 years,” staffers said in a memo to CalPERS’ benefits and program administration committee. The committee is expected to make a recommendation on the issue next week. The full governing board will have final say.

[Steely Tom]

Now we get to play our favorite game: Find The Republican! Where you, in the studio audience, get a front row seat as the California Democrats, with their friends in the Left Coast Media, search high and low find a Republican to pin their latest screw-up on, even though they run everything in the state!

And now, heeers our Find The Republican host, Jerrrry BROWN!

[SeekAndFind]

RE: Ouch. How did this get reported?

______________________________________________________________________________________________________________________________

The Los Angeles Times actually reported it this morning...

See here :

http://www.latimes.com/business/la-fi-calpers-probe-20110315,0,126433.story

Scathing report alleges corruption at CalPERS

A former chief executive and two former board members of the public employee pension fund are accused of steering billions of dollars to politically connected firms.

(Apparently it took a 17 month investigation to dig this out )

CLICK ABOVE LINK FOR THE REST

[dalebert]

I was referring to the fact that the press even bothered to report it.

[kcvl]

Federico Buenrostro Jr., CEO of CalPERS from 2000 to 2008, accepted tens of thousands in gifts from Alfred R. Villalobos. Villalobos’ company Arvco Capital Research got more than $47 million in commissions for selling $4.8 billion in securities to CalPERS from 2005 to 2009.

The California Public Employees’ Retirement System’s outside money-managers paid $180 million over the past decade to middlemen they hired to win business from the largest U.S. public pension, according to a report examining the use of so-called placement agents.

Villalobos represented New York private-equity firm Apollo Global Management and New Jersey-based Medco Health Solutions Inc. (MHS), the largest U.S. prescription-benefits manager.

report said the middleman exercised undue influence over Buenrostro and hosted former board members at his Lake Tahoe retreat, after which the board members voted in favor of Medco’s $26 million contract to manage pharmaceutical benefits for more than 300,000 members of Calpers’ preferred- provider organization health plan.

report said Villalobos, who had no experience in pharmaceutical-benefits contracts, was retained as a consultant by Medco for $4 million after company CEO David Snow and Buenrostro were hosted at Villalobos’ Lake Tahoe home in May 2004.

Villalobos later played host to Snow and three Calpers board members — Charles Valdes, Kurato Shimada and Robert Carlson — in September 2004, according to the report. As members of a Calpers committee, Valdes and Carlson later voted to award the contract to Medco, while Shimada injected himself into discussions on the contract although he didn’t sit on the committee, the report said.

http://tinyurl.com/4dbbwlg

[moehoward]

LOL!!!

[kcvl]

Alfred Villalobos' early career as an investor gave him an edge at CalPERS, where board members were mostly laypeople. His relentless lobbying alienated many, but he used job offers, junkets and other goodies to bring three top officials to his side, a state lawsuit says.

Khinda said Buenrostro tried pressuring staff members to direct investments to Villalobos' clients – known around CalPERS as "friends of Fred."

Khinda said some partners likely inflated fees they charged CalPERS to make up for the $50 million they secretly paid Villalobos.

Buenrostro signed dubious papers saying CalPERS knew of the fees Villalobos was paid. Otherwise, Villalobos would have lost $20 million paid by his top client, Apollo Global Management, Khinda said.

[Lancey Howard]

In a move that could intensify the debate over retirement costs...

LMAO!!!
Not in California.

[kcvl]

Apollo is led by our managing partners, Leon Black, Joshua Harris and Marc Rowan

******

MARCH 11, 2011

Private equity firm Apollo Global Management is looking to raise $300 million to $500 million in an initial public offering as early as this spring, CNBC said, citing unnamed sources.

CNBC said the size of the actual IPO has yet to be finalized, but Apollo has been discussing the listing plan with underwriters Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM) and Bank of America Corp. (BAC).

[Liz]

REFERENCE-----CIRCA 2006
By Peter Schweizer, Research Fellow at the Hoover Institution

SNIP.......it seemed the perfect fit: Bill Clinton, corporate reformer, signing on as a senior adviser (and "active adviser," according to a company press release) to the Yucaipa Corporate Initiatives Fund and the Yucaipa American Fund. Both get all their cash from pension funds from public-school teachers and government workers in California and New York state.

CALPERS, the huge California public-employee retirement fund, has agreed to commit $500 million to Yucaipa, and the California State Teachers Retirement System (CALSTRS) another $150 million. Millions more are to come from the New York State Common Retirement Fund.

Clinton's job, when he joined Yucaipa in April 2002, wasn't just to help make the rich richer: These were to be "investment funds that specialize in lower-income urban and rural communities," as The New York Times reported. Yucaipa managing partner Carlton Jenkins told Black Enterprise magazine that the funds were seeking out "urban-based minority or female-owned businesses."

And Clinton's role in the fund, Yucaipa head Ron Burkle made clear, would not be passive. "He's invaluable," said Burkle, explaining that Clinton would help raise money and offer investment advice to the funds. But a venture that was supposed to help minority businesses and secure the future of pensioners in two of America's biggest states seems to have done anything but.

The Yucaipa Corporate Initiatives Fund has already poured millions into Al Gore's new cable channel, Current Television. Gore's venture is headquartered in a tony neighborhood of San Francisco, which certainly doesn't seem to fit the definition of a "lower-income urban" community. Nor is it minority-owned — indeed, all the major investors are white males. (Indeed, by a who's who of major Democratic Party money people — including Joel Hyatt, former Democratic National Committee finance chairman, Rob Glaser of Realnetworks and Bill Joy of Sun Microsystems.)

Yucaipa told the San Francisco Weekly that Gore's enterprise "has a strong commitment to increase the representation of women and people of color." But the upper management of the network is completely white.

Indeed, one of the few significant minority-owned businesses that the funds have invested in is Sean John, the clothing enterprise run by that struggling representative of the "lower-income urban community," rap mogul Sean "Puffy" Combs. (A contributor to Hillary Clinton's campaigns with the potential of raising enormous sums for Democrats, Combs is likely to play a prominent role in supporting a Hillary run for the White House in '08.)

The funds' real emphasis, in short, seems to be Democratic cronyism. Another example: The Yucaipa Corporate Initiatives Fund recently backed up a bid by Diversified Investment Management Group to take over Piccadilly Restaurants. DIMG is described by Fashion Week Daily "as a front for Ron Burkle," close friend and financial supporter of Bill and Hillary Clinton. He's also the chairman of Yucaipa.

Some of the pension money committed to the Yucaipa funds arrived with curious timing. Carl McCall, then the comptroller of New York and thus the sole trustee of the New York State Common Retirement Fund, began the ball rolling with the Yucaipa Corporate Initiatives Fund just as Sen. Hillary Clinton surprised many Democrats everywhere by endorsing his bid for governor — at a time when his chief opponent in the primary was Andrew Cuomo, who had served President Bill Clinton loyally as secretary of Housing and Urban Development.

The hundreds of millions flowing from California retirement funds come courtesy of California Treasurer Phil Angelides, a longtime Clinton political ally. Now running for governor, his bio mentions his important role (as state California Democratic Party chairman) in electing Bill Clinton to the presidency. The banner photo across his Web site features him standing side-by-side with the ex-president.

Yet, while all the players in the Yucaipa funds are Democrats, they seem a bit confused about their social mission. When Clinton joined up, The Yucaipa American Fund proudly announced that its purpose was to invest in "industries and companies that maintain strong corporate governance practices and are sensitive to the interests of their employees."

Tell that to the employees of Aloha Airlines. The fund is backing a $100 million deal to take over the airline — but it has attached some very tight strings: It's making the deal contingent upon terminating the pilots' pension plan and contract. Yet the federal Pension Benefit Guaranty Corp. says the pension plan is not the problem; the airline can readily afford it. Pilots responded with a strike. (Just to round things out, the two major shareholders in the airline, Hawaii's Ching and Ing families, give overwhelmingly to Democrats.)

Meanwhile, the workers whose pensions have been invested in Yucaipa are getting a terrible deal. According to CALSTARS, California teachers have already committed $61.9 million of the $150 million that they promised Yucaipa. As of last March 31, three years after the venture started, they'd seen a grand total of $837 come back to them. Overall, the rate of return since the funds launched have been a loss of 12.1 percent.

=============================

Calpers failed to disclose:

(1) the state budget was on the hook for shortfalls should actual investment returns fall short of assumed investment returns,

(2) those assumed investment returns implicitly projected the Dow Jones would reach roughly 25,000 by 2009 and 28,000,000 by 2099, unrealistic to say the least

(3) shortfalls could turn out to be hundreds of billions of dollars,

(4) Calpers's own employees would benefit from the pension increases, and,

(5) members of Calpers's board had received contributions from the public employee unions who would benefit from the legislation.

Had such a flagrant case of non-disclosure occurred in the private sector, even a sleepy SEC and US Attorney would have noticed. You said just what I was going to say. Sure, Calpers "did not disclose." But 99% of the California legislature sat on their hands and were willing participants in this fraud.

If a huge bill, with a huge price tag, with a huge financial obligation that extends way into the future, gets passed without more than one legislator raising one question about it, what in Hell's Bells are these people being paid to do?

[WilliamofCarmichael]

Commenting on his "anything-goes" rule of the California Assembly Willie Brown said, "The old white boys got taken fair and square."

After being termed-out and a time as San Francisco mayor Brown was appointed to CAL-PERS by Gov. Davis. That tells me that CAL-PERS is, as bank-robber Willie Sutton said about banks, where the money is.

Whatever shenanigans that are exposed about Willie Brown at CAL-PERS or anywhere else it won't matter one whit. He is totally immune from accountability. Probably it's not totally that he is a VIP protected by his race, he just knows too much about everyone.

See this Dan Walters column reprint, Sacramento Bee Published, January 27, 2003

[phockthis]

Do you have any links for that DATA???

Thanks

[GlockThe Vote]

Bfl.

[MissMack99]

This reads like a Sopranos episode. I recall State Street Bank’s Risk Division was being sued by Jerry Brown over CALPers misappropriations.

[Political Junkie Too]

Jerry, I'll take Abel Maldonado for $100.

-PJ

[mewzilla]

From 2006, on Yucaipa's Ron Burkle....

How a Billionaire Friend of Bill Helps Him Do Good, and Well

[Liz]

Original article at Frontpagemag.com.

Peter Schweizer is a Research Fellow at the Hoover Institution and the author of several books, including
Reagan’s War, The Bushes, and Do As I Say (Not As I Do).