Sunday, 13 July 2014

Former Calpers CEO pleads guilty to bribery and fraud

Calpers is one of the largest public pension schemes in the US.

The latest stunning revelations will not do much good for its reputation.

Article by Yves Smith, some snippets:

In California, the Apollo private-equity firm paid a former CalPERS board member named Alfred Villalobos a staggering $48 million for help in securing investments from state pensions, and Villalobos delivered, helping Apollo receive $3 billion of CalPERS money. Villalobos got indicted in that affair, but only because he’d lied to Apollo about disclosing his fees to CalPERS. Otherwise, despite the fact that this is in every way basically a crude kickback scheme, there’s no law at all against a placement agent taking money from a finance firm.

$48 million wasn’t the total Villalobos got; it was $58 million because he was pushing deals to CalPERS on behalf of four additional clients: Relational, CIM Ares, and Aurora Capital. And the part that has been curiously airbrushed out of every media account of this scandal is Villalobos was engaged in improper conduct, even if he had managed to get the needed sign-offs from CalPERS. He wasn’t a registered broker-dealer, as he was required to be when marketing deals on a regular basis.

The first two payments were made in paper bags. The last installment came in a shoebox. The handoffs all came at a Sacramento hotel near the Capitol.

In a stunning admission covering years of corruption, the former chief executive of CalPERS said Friday he accepted $200,000 in cash, along with a series of other bribes, from a Lake Tahoe businessman who was attempting to influence billions of dollars in pension fund investment decisions.

….20 bank accounts, two Bentleys, two BMWs, a Hummer, art worth more than $2.7 million and 14 properties in California, Nevada and Hawaii.

The article concludes with a recommendation:

That’s why, as the Sacramento Bee stressed in a recent editorial, the time is long past for CalPERS and other public pension funds to provide far more in the way of disclosure of the fees paid and other details of their dealings with private equity general partners. As the SacBee pointed out:

The reasoning behind the disclosure waiver was to protect investment strategies. But they seem to have done a better job of protecting the ability of public equity firms to line their pockets with the public’s money. This is an issue ripe for legislation.

How is the situation in Malaysia, especially regarding the larger government linked funds, is there transparency regarding fees paid to fund managers?

Were for instance fees paid in this case?

"A little-known Hong Kong firm managing US$2.3 billion (RM7.6 billion) of 1 Malaysia Development Berhad’s (1MDB) offshore funds".

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