Executives for Pe?a Investment Advisors dispute claims by a former pension official of the Los Angeles County Metropolitan Transportation Authority that the fund hired PIA to gain favor with Secretary of Transportation Federico Pe?a.
The claims were made in the Los Angeles Times by Melvin Marquardt. Mr. Marquardt took early retirement as investment manager and head of the fund in late 1993 following the merger of two transportation authorities, and their pension funds, in Southern California.
The Los Angeles County MTA is in the midst of building a controversial subway that had more than $1.3 billion in federal funding commitments frozen, and then un-frozen, by the Department of Transportation under Mr. Pena.
In the newspaper article, Mr. Marquardt said in reference to Mr. Pe?a: "The question is, would the firm have been hired if he had not been who he was at that time? Most likely not. ... In all honesty, (the firm) would not have been hired."
Mr. Pe?a founded the Denver-based firm in 1991 with Jose L. Santillan, president and chief investment officer, and Michael Barela, senior vice president. Mr. Pe?a divested himself of his ownership in the firm following his cabinet appointment. According to Pe?a executives, he will never again be a part of the firm.
Mr. Barela said Pe?a officials never would try to capitalize on the company's former relationship with Mr. Pe?a. "Our integrity is the most valuable asset we have," he said.
"You can't build a business that way," said Susan Reinke, chief operating officer and treasurer.
Mr. Pena could not be reached for comment, but told the Times his actions as secretary have not been influenced by PIA's hiring.
In a telephone conversation with Pensions & Investments, Mr. Marquardt refused to say why he is bringing up the charges now, instead of when he and other then-trustees voted unanimously to hire Pe?a.
Mr. Marquardt declined further comment beyond what was in the Times article. "I really don't have anything to add," he said. Mr. Marquardt now works for stockbroker Sutro & Co. in Los Angeles.
Others said they are not sure why Mr. Marquardt was making the statements. Pe?a executives and Les Porter, the fund's treasurer and Mr. Marquardt's successor, said they could not explain Mr. Marquardt's statements or similar ones made by two other former officers of the fund. The others could not be located.
Mr. Barela said Pena Investment Advisors was hired by the Los Angeles County MTA solely on its performance and qualifications. The firm was hired in February 1993 to manage a $5 million small-capitalization growth account for the fund, a few months after Mr. Pe?a was named to the cabinet post by President Clinton.
Pena Investment executives said they thought the hiring was the culmination of more than six months of marketing the firm as an emerging manager to the transportation fund. They said PIA also had called on several other Southern California-based funds, public and private, as part of that process.
PIA was not the only firm hired at the time. Another minority manager, Galleon Capital Management, was hired to run $5 million in large-cap growth. Galleon later closed for business (P&I, Nov. 14, 1994).
Mr. Porter of the MTA said the current board is reviewing the situation. He said he wasn't involved with the fund when PIA was hired. Mr. Porter said it is his understanding the firm was hired on a recommendation from staff, not out of an effort to gain favor with the transportation secretary.