A California political ethics commission is investigating more than $38,000 in campaign donations to a California Public Employees' Retirement System board member. Some of the donations came from associates of a California-based placement agent who did significant business with the pension.
The investigation is being run by California’s Fair Political Practices Commission (FPPC). It has declined to discuss the focus of the investigation, which started after the commission ran a mandatory audit of the campaign account of Charles Valdes, according to Roman Porter, the executive director of the commission.
Valdes, a board member with CalPERS for 25 years, received $38,600 in campaign donations in 2005, when he was re-elected to the board, according to state records and the FPPC.
The bulk of the donations came from associates and businesses tied to Alfred Villalobos, chairman and senior managing director of ARVCO Capital Research, a placement agency based in Nevada. Villalobos is a former CalPERS board member.
Records of contributions to Valdes’ 2005 re-election campaign show more than $20,000 coming from people who had once been employed by ARVCO or Capital Formation Partners, another of Villalobos’ businesses. Capital Formation Partners itself made a direct contribution, according to the records.
ARVCO secured about $4 billion in commitments for its private equity clients from CalPERS after Villalobos’ associates made the campaign donations in 2005.
For example, with ARVCO as placement agent, CalPERS committed $1 billion to Apollo Investment Fund VII in 2008; $650 million to Apollo Investment Fund VI in 2006; $800 million to Apollo Special Opportunities Managed Account in 2007; $400 million to Aurora Resurgence Fund in 2007 and $500 million to PCG Corporate Partners II in 2007.
ARVCO also served as placement agent for a $10 million commitment CalPERS made to AP Alternative Assets and a $588 million commitment the pension made to Apollo Global Management, though the dates of the commitments could not be verified.
CalPERS had no comment about the investigation. Villalobos did not return a call for comment.
The FPPC’s investigation is ongoing but will be wrapped shortly, Porter told PEO.
FPPC’s investigation is not connected to a larger investigation by the attorneys general of various states, including New York, into a wide-ranging pension kick-back scandal. The larger investigation has resulted in charges against six people for taking part in a scheme to collect fake finder’s fee from investment firms in exchange for commitments from large public pensions like the New York State Common Retirement Fund.
New York attorney general Andrew Cuomo has reached settlements with The Carlyle Group, Riverstone and Pacific Corporate Group in the investigation. As part of the settlements, the firms have paid fines and signed on to codes of conduct governing the use of placement agents to avoid prosecution.
The investigation also has led to a flurry of regulatory activity by politicians. Cuomo crafted a code of conduct governing the interaction between investment firms and public pensions, and the US Securities and Exchange Commission in July approved sweeping rules that bar private equity firms from hiring placement agents to solicit investments from public pensions.