Business
By Dale Kasler
dkasler@sacbee.com
Published: Friday, Aug. 27, 2010 – 12:00 am | Page 6B

A top CalPERS official, suspended after being linked to the bribery scandal involving former board member Alfred Villalobos, quit the pension fund Thursday.

Senior investment officer Leon Shahinian, who oversaw CalPERS’ $40 billion pool of private equity money, is joining the private sector.

“He has other opportunities in private industry,” said his lawyer, Malcolm Segal. “There’s a tremendous amount of interest.”

Shahinian was placed on paid administrative leave in May after his name surfaced in Attorney General Jerry Brown’s lawsuit against Villalobos and former CalPERS Chief Executive Fred Buenrostro.

Although Shahinian isn’t a defendant in the case, the lawsuit says Villalobos bribed him by taking him on a lavish, all-expenses-paid trip to New York in 2007. Weeks later, without telling anyone about the trip, Shahinian helped persuade the CalPERS board to invest $600 million with one of Villalobos’ clients, Apollo Global Management.

The deal earned Villalobos a $13 million commission, the single biggest payday in his career pitching investment deals to the California Public Employees’ Retirement System. Villalobos served on the CalPERS board from 1992 to 1995.

Segal, who represented Shahinian when he testified recently in Villalobos’ bankruptcy case, said his client did nothing wrong in going to New York with Villalobos.

“Nothing’s been alleged about (Shahinian) that would not cause an employer to want to hire him,” Segal said.

Shahinian testified in a closed-door session that he considered the New York visit a business trip because he met with officials from Apollo and because he was told Apollo was paying the costs.

Villalobos also has said Apollo paid for the trip, and Segal said it was proper at the time for Apollo to foot the bill.

Back then, the pension fund’s policy said investment partners paid the costs when CalPERS executives traveled to meet them. CalPERS and Apollo had already been partners for years.

Another top CalPERS official, Joncarlo Mark, testified in the Villalobos bankruptcy case that he regularly traveled to such cities as New York and Shanghai to meet with the pension fund’s partners, at the partners’ expense.

CalPERS changed the policy two years ago so the state pays for such trips.

In the lawsuit, state officials said Villalobos spent $50,000 chartering a jet to fly himself and Shahinian to New York. They stayed at a five-star hotel and attended a black-tie museum fundraiser honoring Leon Black, the head of Apollo, and movie director Martin Scorsese. The trip cost $63,000 in total.

Shahinian, in his testimony, said Villalobos sent him some bottles of wine after the trip. He returned them because, he said, “I just thought it was the right thing to do.”

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