The Widening Pubic Pension Corruption Scandal
Last week, Julio Ramirez, an investment banker and former politico in the LA area (he managed Richard Riordan's successful LA Mayor campaign), turned himself in to New York Attorney General Andrew Cuomo as part of a widening state pension scandal that has engulfed virtually every public pension fund in America. The short version of this is that a network of state officials, investment bankers and various go-betweens concocted a scheme where the officials would place their pension funds in the hands of particular firms in exchange for campaign or just personal cash, and the firms who got the contracts would skim a few dollars off the top to give to the "placement agency" who got them the work. Ramirez worked for Wetherly Capital Group, one of the placement agents, who secured what looks to be billions of dollars in pension fund money for its clients, and received millions back in finder's fees. One of them was CalPERS, to which Wetherly delivered about $300 million to its money managers.
It's a complicated story, but it comes at a time when CalPERS and other public pensions are struggling with all their stock market losses and increasing burdens as more employees hit retirement. The sale of access to the pension funds raises all kinds of ethical questions, and has clearly made the middlemen and the controllers of the purse strings for the investments ridiculously rich at state employee expense. The Carlyle Group, a major investment partner in CalPERS, just settled out of court for $20 million dollars to avoid charges in the probe.
This fits in with the general crisis in confidence that California citizens are having with their government. Keep an eye on this, because it will continue to reverberate over the next several months.