The $200 billion California Public Employees’ Retirement System has initiated an investigation of fees paid by some of its fund managers to placement agents, including an agency run by a former CalPERS board member.
The investigation was sparked by information given to CalPERS by investment funds that reported payments of more than $50 million in fees over five years to ARVCO Financial Ventures, a placement agency run by Alfred Villalobos, a former CalPERS board member. Villalobos served on the CalPERS board between 1993 and 1995.
Law firm Steptoe & Johnson will lead the investigation, CalPERS said.
“The placement agent industry has been a focus of state authorities and the Securities and Exchange
Commission over the last year, and we believe it prudent to conduct a full review of the matters related to these recent disclosures to us,” Anne Stausboll, CalPERS’ chief executive officer, said in a statement.
CalPERS has not disclosed what firms or other placement agents are involved in the fee review. Villalobos did not return a call for comment Wednesday.
Villalobos said during a media conference call Wednesday ARVCO will fully cooperate with CalPERS' internal investigation. The review will show that CalPERS' staff and board members have acted properly in the investment decisions, Villalobos said.
Also, Villalobos said, “for the record, [ARVCO] does not make recommendations to CalPERS or any other investor. We introduce and present investment opportunities to them. The staff, consultants and advisors are the ones who make recommendations on investment opportunities after completing their due diligence process”.
Villalobos declined to comment further, but said he was “sure” he would be talking to the media again in the future.
ARVCO is already tied up in one investigation over campaign donations paid by associates of the firm to a CalPERS board member.
A California political ethics commission, the California Fair Political Practices Commission, is investigating more than $38,000 in campaign donations made to CalPERS board member Charles Valdes. The bulk of the contributions came from associates of Villalobos, who is chairman and senior managing director of ARVCO, which is based in Nevada.
Valdes, who has been a CalPERS board member for 25 years, received $38,600 in campaign donations in 2005, when he was re-elected to the board. More than $20,000 of the donations came from people who had once been employed by ARVCO or Capital Formation Partners, another of Villalobos’ businesses.
ARVCO secured about $4 billion in commitments for its private equity clients from CalPERS after 2005.