Gov. Arnold Schwarzenegger has signed a bill clamping down on placement agents, the marketing middlemen at the heart of a multistate probe into corruption of public pension funds.
Assembly Bill 1584, by Assemblyman Ed Hernandez, D-West Covina, requires disclosure of fees paid by investment firms to placement agents. It also requires agents to notify pension system governing boards of any campaign contributions or gifts they've made to system board members.
James Hawley, a business professor and pension expert at St. Mary's College of California, said the law should help expose any corruption.
"It does do the obvious – it makes that kind of pay-to-play … more transparent," Hawley said.
Placement agents are door openers. They're hired by private equity groups and other investment firms to secure business from public pension funds such as the California Public Employees' Retirement System and State Teachers' Retirement System. As The Bee has reported, placement agents have secured hundreds of millions in investment dollars from the two California pension funds.
At issue is whether placement agents can improperly influence pension fund boards. In March, a prominent New York political operative and placement agent was indicted on charges of selling access to that state's public pension fund.
The New York scandal has broadened, with subpoenas issued by California Attorney General Jerry Brown, the Securities and Exchange Commission and others.
In May, a former employee of a major Los Angeles placement agent firm, Wetherly Capital Group, pleaded guilty to paying fees to the New York operative. The Wetherly firm has successfully represented clients seeking business from CalPERS and CalSTRS.
The Bee has reported that a Nevada placement agent firm – Arvco Capital Research, headed by former CalPERS board member Alfred Villalobos – was among the most successful at securing business from CalPERS.
In addition, The Bee reported that CalPERS board member Charles Valdes was being investigated by the Fair Political Practices Commission for accepting campaign donations from firms doing business with the fund, including Arvco.
The investigation is still in progress, the commission said Monday.
CalPERS adopted a policy in May requiring investment firms to disclose whether they've hired placement agents. CalSTRS created a similar policy in 2006.
The new law imposes additional controls and extends them to all public pension funds in California.
Call The Bee's Dale Kasler, (916) 321-1066. Read his blog on the economy, Home Front, at www.sacbee.com/blogs.
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