Prompted by a scandal involving CalPERS, it would require that ‘placement agents’ who make pension fund deals with investment managers register as state lobbyists.

Placement agent Alfred R. Villalobos was paid $70 million in commissions by Wall Street firms. (Allen J. Schaben / Los Angeles Times / May 28, 2010)

By Marc Lifsher, Los Angeles Times

October 1, 2010

Reporting from Sacramento —
After a yearlong scandal involving alleged influence peddling and corruption, Gov. Arnold Schwarzenegger on Thursday signed a bill that will regulate the activities of outside deal-makers who help investment managers secure government pension fund money.

The pension bill, backed by the board of the California Public Employees’ Retirement System as well as the state treasurer and controller, requires that so-called placement agents register as lobbyists before they can pitch investment proposals to the $200-billion pension fund’s staff and board members.

Registration would subject the deal-makers to restrictions on gifts under the California Political Reform Act and outlaw the payment of commissions based on the value of investment deals they put together.

“This bill will make certain that the interests of people on Main Street are shielded from the worst kind of influence peddlers on Wall Street,” said Assemblyman Edward Hernandez (D- West Covina). Hernandez wrote the bill, which takes effect Jan. 1.

The prohibition is aimed at preventing a repeat of the $70 million in commissions paid by a handful of Wall Street investment funds to placement agent Alfred J.R. Villalobos, a former CalPERS board member and former Los Angeles deputy mayor.

Villalobos, a Stateline, Nev., businessman, has been sued for alleged fraud by the California attorney general’s office and is the target of a probe by the U.S. Securities and Exchange Commission.

Putting placement agents under the eye of the state Fair Political Practices Commission sends the message that “public pension funds are not for sale,” said state Treasurer Bill Lockyer. It also “ensures that investment decisions are made on the merits, adds transparency to the process and helps prevent corruption.”

The governor also signed a human trafficking bill that requires large retailers and manufacturers with more than $100 million in annual revenue to tell consumers via their websites what steps, if any, they are taking to police their supply chains for slave labor.

“With better transparency, Californians can now ensure they do not promote and sanction these heinous crimes through the purchase of everyday items that have tainted supply chains,” said the bill’s author, Senate President Pro Tem Darrell Steinberg (D- Sacramento). “This is a simple measure that has the potential to change behavior in a way that will save lives and encourage humane working conditions not just here in California but throughout the world.”

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