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16 At CalPERS To Pay Fines For Gift Reporting Lapses

Sixteen California Public Employees Retirement System employees and former employees reached a settlement to pay fines for allegedly receiving but not properly reporting a slew of gifts that included a face scrubber, a hot air balloon ride and tickets to the Rose Bowl Game.

The list of alleged gift policy violators was made public by the California Fair Political Practices Commission (see accompanying table).The fines were finalized at an FPPC meeting on Sept. 22nd.

In a statement, Anne Stausboll, CalPERS’s chief executive, wrote, “We are fully committed to transparency, openness and the highest ethical standards.” The pension said it has responded by strengthening its internal reporting policies and increasing compliance training for employees.

Importantly, the FPPC outlined significant mitigating circumstances surrounding the gifts in the report. In a memo, the FPPC’s chief of enforcement, Gary Winuk, said “there is no evidence of intentional non-disclosure. The conduct was at worst negligent and at best inadvertent.” Furthermore, Winuk said, none of the employees cited by the FPPC had any prior violations, and “none of the gifts resulted in any conflicts of interest.”

The FPPC initially investigated CalPERS employees in May 2011, following even more severe charges by federal and state authorities alleging that former CalPERS Chief Executive Federico Buenrostro and others on CalPERS’s private equity team were wined, dined and sent on luxurious trips at the invitation of Alfred Villalobos, a placement agent and former CalPERS board member who was working on behalf of Apollo Global Management. Villalobos and Buenrostro still face a state level lawsuit, and are also being investigated by federal authorities.

In the subsequent months of heightened scrutiny at CalPERS, the FPPC focused on lesser violations, particularly the late or lapsed reporting by investment officers and board members of small gifts and meals given to them by firms that advise CalPERS or invest (or want to invest) the pension’s money. California state employees have been allowed to receive gifts worth up to $50, but those gifts must be reported. In the wake of the gift controversy, the pension has moved to prohibit employees from accepting any gifts.

Because of the more serious alleged violations by Buenrostro, Stausboll urged all CalPERS employees to voluntarily amend their gift disclosures if they had anything additional to report. In all, 33 CalPERS employees did just that.

The value of the gifts in question rarely exceeded the low three figures. The largest proposed fine was a relatively modest $3,600. Moreover, many of the gifts were within acceptable limits, but were reported incorrectly or late.

The 16 CalPERS employees and ex-employees cited by the FPPC include Rob Feckner, the current CalPERS Board President. He was to be fined $400 for having dinner and drinks paid for by Goldman Sachs and AEW Capital Management. Another board member, Louis Moret, was also set to be fined $400 for dinner from AEW and Capital Guardian.

On CalPERS’s private equity team, the alleged gift violators included Joncarlo Mark, a senior portfolio manager who recently left to create his own investment firm. Mark was to be fined $1,400 for receiving gifts and meals from Leonard Green and Partners, Birch Hill Equity Partners, Advent International, Alpha Capital Partners and Credit Suisse. Notably, he also received a $100 face scrubber from Rosewood Capital.

Michael Dutton, also a former senior portfolio manager for private equity, was to be fined $2,200 for receiving gifts and meals from the Blackstone Group, LP Capital Advisers, Credit Suisse, Hamilton Lane and Lexington Partners. Sarah Corr, who remains a senior portfolio manager on the private equity team, was to be fined $1,600 for gifts and meals from TPG Capital, The Carlyle Group, Oak Hill Investment Managers, Probitas Partners and LP Capital Advisers.

The biggest fine was to be given to Shaun ‘John’ Greenwood, a portfolio manager. He was to receive an $3,600 fine for 18 alleged violations of the state’s gift policy. The alleged violations include gifts and meals from Thomas H. Lee Partners, Khosla Ventures, Rhone Group, Credit Suisse and CVC Asia. Notable among Greenwood’s gifts were tickets to Cirque du Soleil from the Carlyle Group.

Other gifts to CalPERS employees included a hot air balloon ride, a kayak trip, Rose Bowl tickets, and tickets to an Oakland Raiders football game.