Firms & Funds

Ex-CalPERS PE chief Shahinian opposes ‘weakened’ transparency bill

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CalPERS. private equity, pension fund, Ted Eliopoulos, CIO
Calpers headquarters in Sacramento, California, on October 21, 2009. Photo courtesy Reuters/Max Whittaker - RTXPWO1
  • Shahinian says amended version of bill weakens disclosure
  • Testifies in opposition of bill on June 27
  • Former CalPERS PE chief opened stores in CA

The amended version of California’s private equity fee-transparency bill attracted opposition from an unusual source in recent weeks.

In public comment of a June 27 Senate committee meeting, former California Public Employees’ Retirement System private equity chief Leon Shahinian said the amended version of the bill “weakened disclosure relative to the original language,” he told Buyouts in an email. The bill is being considered by the California State Senate.

“As a beneficiary of CalPERS and someone with knowledge of the issue, I felt compelled to highlight the change at the Senate Committee hearing and to express my opposition to the bill as currently drafted,” he wrote. “The original language was far better for the big [California] LPs, and given their leadership position in the PE industry, it’s unfortunate they’re letting an opportunity like this slip.”

In its original form, Assembly Bill 2833 required PE general partners to disclose the total fees charged to portfolio companies by funds, affiliates and related parties. In the amended version, GPs would have to tell California’s public LPs only their pro-rata share of those fees.

PE firms often use several investment vehicles to buy portfolio companies. Even if an LP knows a fund’s pro-rata share of fees, lack of insight into other vehicles used in the transaction would make it impossible to determine the total fees and expenses charged to portfolio companies.

Shahinian’s presence marked a rare return to the public spotlight for CalPERS’s former private equity chief. Shahinian left the system after he was named, but not charged, in then-Attorney General Jerry Brown’s investigation of a pay-to-play scheme involving former officials Federico Buenrostro and Alfred Villalobos.

Buenrostro pleaded guilty to fraud and bribery charges in 2014 and was sentenced to 4 1/2 years in prison earlier this year. Villalobos committed suicide in 2015.

After resigning from CalPERS in 2010, Shahinian opened a pair of fitness retail stores in Northern California.

“I spoke when the Committee asked if anyone wanted to offer testimony in opposition of the bill. I did so on my own behalf, as a knowledgeable citizen and as a beneficiary of CalPERS,” Shahinian told Buyouts.

Action Item: An amended version of AB 2833: http://bit.ly/29BswqM