CalPERS trustee claims staffers prepared to bolt
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Directional signs respresenting types of traditional and alternative investments
      Setter: Alternative secondary deals drop 27.7% in 2020
      Kennedy Lewis raises $2.1 billion for latest opportunistic credit fund
      Emma Davies
      Octopus Ventures chooses co-CEO
      BEX Capital brings on head of origination
    • Amy Hsiang
      Meketa picks new public markets manager research director
      Will Martindale
      Cardano Group chooses group head of sustainability
      Meketa hires first chief marketing officer
      Nick Horsfall
      Redington names managing directors for investment consulting team
    • Multiemployer pension plans could soon see relief
      Yellen calls for more COVID relief, retirement access
      A healthcare worker provides care for a COVID-19 patient in the intensive care unit at the Saint Joseph hospital in Marseille, France, on Nov. 20, 2020.
      World must act to strengthen against future pandemics – report
      New York State Common challenges Tyson’s dual-share stock structure
    • Kenneth J. Munro III
      Empower names new national sales director
      Fidelity cuts target-date asset threshold for lower fees
      DCIIA looks to spark engagement with plan sponsor institute
      Ascensus, Empower acquire Truist record-keeping business
    • LaSalle Investment Management taps 2 for new ESG roles
      Sovereign credit ratings vulnerable to ESG risks — Moody’s
      JPMAM names head of investment stewardship, Asia ex-Japan
      New law requires MassPRIM to increase diversity of managers, consultants
    • Galina Churkina
      Building research earns honor from Aquila Capital
      Blackstone holiday video
      Blackstone would like to show you how things are done around the office
      MacArthur Foundation invests in women’s safe housing fund
      Bill Harmon
      Voya offers fee break for minority-owned firms
    • Shanghai skyline
      Global hedge funds struggle even in a more open China market
      The Sun Hung Kai Properties Ltd. logo is displayed on the Sun Hung Kai Centre building in Hong Kong on Sept. 13, 2018
      SHK spins out East Point Asset Management
      Man holding a business card with Hedge Fund written on it
      Hedge funds chalk up decade’s best returns in 2020 – HFR
      New hedge fund launches surpass liquidations in third quarter
    • Nuveen sells holdings in sanctioned Chinese stocks
      Biden team to review Labor Department ESG rule
      Chicago Transit Authority drives search for discretionary investment consultant
      Directional signs respresenting types of traditional and alternative investments
      Setter: Alternative secondary deals drop 27.7% in 2020
    • Standard Life Aberdeen CEO Stephen Bird
      Standard Life Aberdeen CEO: Some staff won't get bonuses
      Nuveen sells holdings in sanctioned Chinese stocks
      Northern Trust to take $55 million charge for job cuts
      Michaela Collet Jackson
      Columbia Threadneedle chooses first head of distribution for EMEA
    • Ohio Public Employees returns 11.35% in 2020
      Wisconsin ETF picks new secretary
      State plan funding ratios jump in Q4
      CalPERS records 12.4% return in 2020
    • Kenneth J. Munro III
      Empower names new national sales director
      Michaela Collet Jackson
      Columbia Threadneedle chooses first head of distribution for EMEA
      Wisconsin ETF picks new secretary
      Amy Hsiang
      Meketa picks new public markets manager research director
    • Pension funds continue private equity investing spree
      Big jump in private equity AUM expected over next 5 years
      Thoma Bravo takes in $22.8 billion for 3 funds
      Jason Thomas
      Data, technology become new prized possessions
    • Chiang Ling Ng
      Hines hires first head of Asia-Pacific real estate investments
      Brand new apartment building on sunny day in spring with blooming trees
      Real estate returns forecast to trend lower – report
      Ivanhoe Cambridge Inc. signage is displayed outside the company's office near Bay Street in Toronto on Aug. 29, 2011
      Ivanhoe Cambridge, PAG announce joint venture for Japan logistics investments
      Residential buildings in Hong Kong on Feb. 20, 2020
      KKR closes first Asia-Pacific real estate fund at $1.7 billion
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Outlook 2021
      The top 10 stories of 2020
      The best places to work in money management
      Investment consultants
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Fresno County puts $150 million into 2 real estate funds
      Chicago Transit Authority drives search for discretionary investment consultant
      Finland’s Varma chooses Nordea for emerging market equities
      Texas County & District picks direct lending fund for first 2021 commitment
    • Fresno County puts $150 million into 2 real estate funds
      Chicago Transit Authority drives search for discretionary investment consultant
      Finland’s Varma chooses Nordea for emerging market equities
      Texas County & District picks direct lending fund for first 2021 commitment
    • International Small Cap Manager Services
      Financial Expertise
      Passive Index Manager Services
      Emerging Markets Equity Investment Management Services
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      view gallery
      25 photos
      2020 in editorial Cartoons
      view gallery
      25 photos
      Cartoons depict a year like no other
      Consultants cartoon
      Seeking an investment consultant? Caveat emptor
    • GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
      Gold Outlook 2021
      Bond ETFs show maturity during Covid market mayhem
      2021 Outlook: A rousing recovery
    • Charles E.F. MIllard
      Commentary: It’s time to make 401(k) plans into real pension plans
      Michael McNally
      Commentary: New ‘investment-plus’ test poses risks to private equity investors
      Adam Waterous
      Commentary: Institutions urged to act now on opportunities created by current global oil disruption
      Ron Lagnado
      Commentary: Straw man critiques don’t hold up in face of real world success
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
      Sponsored Content By Aberdeen Standard Investments
      Taking a passive approach to the hedge-fund universe
      Sponsored Content By World Gold Council
      Gold: the most effective commodity investment
      Sponsored Content By Moody's Analytics
      The Industrialization of ESG Investment
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:24
      U.S. stocks were 2020’s comeback kid
      watch video
      1:23
      Outlook 2021
      watch video
      1:52
      Buy gold's pullback?
      Coronavirus and the S&P 500: 2020
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
    • POLL: Retirement issues in 2021
      POLL: Money managers' priority in Asia-Pacific region
      POLL: Retirement issues in the presidential election
      POLL: The S&P 500 in the third quarter
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      Graphic: U.S. stocks were 2020's comeback kid
      U.S. fixed-income returns post another positive year
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
March 21, 2011 01:00 AM

CalPERS trustee claims staffers prepared to bolt

Tighter ethics rules, public perception cited

Randy Diamond
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Going: J.J. Jelincic believes civil service status for investment staff should be kept.

    Many CalPERS investment staffers are looking for new jobs, upset with both proposed ethics rules that they feel go too far and a perception that that all CalPERS employees are disreputable, board member J.J. Jelincic revealed.

    “People are getting extremely tired of being beat up all the time,” Mr. Jelincic said in an interview with Pensions & Investments. “Morale is way down.”

    The comments by Mr. Jelincic — who also serves as a CalPERS investment officer — are backed up by several former investment staffers of the $230.1 billion California Public Employees' Retirement System, Sacramento. They say privately that some of the fund's most senior and experienced investment personnel could soon be leaving.

    Many of the proposed changes would affect personnel at CalPERS' investment office. As one of the largest U.S. pension plans, CalPERS' investment office staff of 240 rivals that of many money management shops. The staff, including support personnel, not only monitors investments, but also invests about half of CalPERS' assets.

    The potential departures come as proposed ethics rules would make it easier to suspend without pay or terminate investment staffers and restrict their post-employment options.

    The proposed rules are the result of ongoing state and federal corruption investigations as well as a civil suit by the California attorney general charging former CEO Fred Buenrostro and ex-board member Alfred Villalobos with corruption.

    Last week, a CalPERS-commissioned investigative report found the nation's largest defined benefit plan spent tens of millions of dollars unnecessarily because Mr. Buenrostro allegedly steered contracts to clients represented by Mr. Villalobos, who had become a placement agent.

    Washington lawyer Philip Khinda, who conducted the investigation, said changes such as post-employment restrictions for retirement system employees are needed. “We cannot overstate the importance of these recommendations to safeguard the institution,” he said in an interview.

    Mr. Buenrostro went to work for Mr. Villalobos' company, ARVCO Capital Research LLC, seven weeks after he was forced to resign by the CalPERS board, the report said.

    The report also discusses disclosure forms from Apollo Global Management to meet what Apollo officials felt were federal securities law requirements and to inform the company's private equity investors that it was paying fees to placement agents.

    The forms said CalPERS officials understood that Mr. Villalobos was receiving fees in connection with the pension system's investments in various Apollo funds. The CalPERS investment staff did not feel “it was appropriate for anyone at CalPERS to execute” the disclosures, the report said, and were advised not to sign the forms by CalPERS' in-house and outside counsel.

    But Mr. Buenrostro signed 11 different disclosures requested by Apollo in 2007 and 2008.

    The disclosures enabled Mr. Villalobos, who had made a standing offer of employment to Mr. Buenrostro, to receive more than $20 million in fees from Apollo, the report said.

    One form was signed after Mr. Buenrostro resigned on May 12, 2008, but still listed him as CEO. The report characterized the signing of the forms as a “striking example of Mr. Buenrostro's failure to discharge his duties of care and loyalty to the institution (CalPERS) and the many beneficiaries it serves.”

    In a statement to P&I, CalPERS spokesman Brad Pacheco said the retirement system must adopt a series of reforms to “make sure the incidents detailed in the report do not happen again.”

    In his report, Mr. Khinda cited the case of Leon Shahinian, a senior investment officer who had headed the system's private equity program. Mr. Shahinian — one of the system's most highly paid employees, who made $500,000 annually in 2006 and 2007, according to state records — earned more than $100,000 while on administrative leave that started in May 2010.

    The report said Mr. Shahinian accepted Mr. Villalobos' offer to fly on a private jet to New York City to attend a May 2007 black-tie gala for Leon Black, founder of private equity firm Apollo Global Management, and stayed at Mr. Villalobos' two-bedroom hotel suite. Mr. Villalobos was representing Apollo at the time.

    A month later, according to the attorney general's suit against Mr. Villalobos, Mr. Shahinian recommended that the CalPERS board approve the purchase of an ownership interest in Apollo. The report said Mr. Villalobos was reimbursed by Apollo for the cost of the $50,000 plane ride, $8,000 in hotel charges and $1,500 in car service fees.

    Mr. Shahinian originally had resisted repeated attempts by Mr. Buenrostro to influence the investment process, telling CalPERS board President Rob Feckner that Mr. Buenrostro was trying to influence the investment process for friends, the report said. It also said Mr. Shahinian told Mr. Black it was unnecessary for Apollo to recruit Mr. Villalobos for help in obtaining CalPERS contracts.

    “After years of apparently diligent performance for CalPERS, however, (Mr.) Shahinian seemed to lose his way,” the report said.

    The report criticized Mr. Shahinian for his New York trip. “While these dealings do not appear to have altered the analysis that he and the investment staff performed on the proposed transaction, (Mr.) Shahinian's failure to inform his CIO and the board of his activities in New York before their approval of the investment was a disappointing error in judgment — an error as graveas his decision to accept the invitation,” the report said.

    Cited regulations

    Mr. Khinda told the CalPERS board on March 15 that Mr. Shahinian remained on the payroll because state civil service regulations required that he continue to receive his salary. He said CalPERS should ask the state Legislature to streamline civil service regulations so employees can be disciplined more quickly and the pension system does not “bear the cost of their high salaries.”

    Mr. Jelincic said state civil service regulations would have allowed CalPERS to cut Mr. Shahinian's salary within five days of being accused of wrongdoing.

    “They could have put a bullet in his head,” Mr. Jelincic said.

    But he said he believed CalPERS officials agreed to let Mr. Shahinian continue to draw his salary because of the report's conclusion that the private equity investment chief originally resisted Mr. Buenrostro's attempts at influencing the investment process.

    Mr. Shahinian resigned in August 2010 after three months on administrative leave.

    Malcolm Segal, a Sacramento attorney for Mr. Shahinian, said his client had adhered to high ethical standards. He said it was standard policy in 2007 for investment managers to pay for the staff travel of CalPERS investment personnel. “He did nothing wrong in traveling to meet a client,” he said of Mr. Shahinian.

    Mr. Jelincic, a former state worker union leader, said the investment staff's civil service status is a good thing. He said the fact that investment personnel are not at-will employees, as is the case at most investment firms, gives them confidence to question management decisions when needed.

    CalPERS CEO Anne Stausboll told board members on March 15 that given the controversial nature of the proposal to reduce civil service protection, it will need to be studied over the next few months.

    Mr. Jelincic said the investment staff is bound to be upset with the new proposal. “It's just another drop in the water torture,” he said.

    Mr. Jelincic said he expects the board to ultimately recommend that the Legislature implement the proposal. “If it's a good-government thing, we can pass it,” he said. “Whether it makes sense or not is another thing. The perception is driving the train.”

    Mr. Jelincic abstained when all other trustees on March 16 approved supporting a legislative bill that would prohibit board members and staffers from accepting gifts of more than $50 a year from any entity doing business or planning to do business with the system. The current limit is $450 a year.

    While the bill might be well-meaning, Mr. Jelincic said, CalPERS officials are being put in a double bind. They can't allow investment managers to pick up the bill for meetings that take place in fancy restaurants, yet the state per-diem allowance doesn't give them the money to pay for the meal itself without opening their own wallets.

    He said the state per-diem allowance is $6 for breakfast, $11 for lunch and $18 for dinner, an inadequate amount when traveling in places like New York City. “How many places in Manhattan can you find a dinner for $18?” he asked.

    Out of pocket

    A CalPERS official, who asked not be identified, said Ted Eliopoulos, senior investment officer for real estate, was forced to write a $500 check from his personal account to attend a function in China earlier this year to discuss the retirement system's real estate investments. The official said that because CalPERS policy would have prohibited his Chinese hosts from covering the expense, Mr. Eliopoulos had a choice to miss the meeting or cover the expense himself.

    Mr. Eliopoulos declined to comment and referred a caller to CalPERS' press office. Mr. Pacheco, the spokesman, did not directly address the payment Mr. Eliopoulos made, saying only: “We would agree that the state per-diem rates are insufficient and that this is a statewide problem in government that needs to be addressed.”

    Another resolution passed by trustees last week supports legislation by state Controller John Chiang that would prohibit for two years former CalPERS investment staffers from working at investment firms that have done business with CalPERS.

    Mr. Jelincic said the ban is making some employees consider leaving the system now because they don't want to be bound by the new rules. He added that investment staffers receive relatively low pay compared with their peers in the investment industry. “Everyone I know who has left CalPERS has at least doubled their salary,” he said.

    Investment officers who work for CalPERS make up to $108,000 a year without bonuses, while more senior portfolio officers can make up to $189,000, according to the California Department of Personnel Administration.

    Mr. Jelincic said the fund has been able to attract qualified staffers because working at CalPERS provides great experience and builds resumes. He said he is concerned that potential candidates might not consider CalPERS if post-employment restrictions are put in place.

    Mr. Chiang, an ex-officio member of the CalPERS board, insisted that regulations, such as banning former CalPERS staffers from working for investment companies for a period of two years, will help remove the taint of unethical behavior that has hurt morale.

    “We want to remove the appearance of influence,” he said.

    Related Articles
    CalPERS board puts tight limits on itself for gifts
    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Targeting millennials: Author, niece put his latest book to music
    Targeting millennials: Author, niece put his latest book to music
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    Gold Outlook 2021
    Bond ETFs show maturity during Covid market mayhem
    Global gold-backed ETFs: A popular gateway to the gold market
    2021 Outlook: A rousing recovery
    Climate change and emerging markets after Covid-19
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center