Monthly Archive for September, 2010

Did an LA money man give up ex-NY Comptroller Alan Hevesi?

September 29, 2010, by Seth Hettena. 0 Comments

Broidy and Bibi

Did admitted felon, Bush fundraiser and former RNC finance committee chairman Elliott Broidy give up the goods on former New York Comptroller Alan Hevesi?

Broidy, former chairman of Markstone Capital Group, pleaded guilty in December to a felony and admitted showering officials at the New York state pension fund with nearly $1 million in exchange for a $250 million investment in Markstone. As part of his plea, Broidy agreed to cooperate with investigators with the New York State attorney general’s office.

The news today is that Alan Hevesi, the New York comptroller who oversaw the pension fund, reportedly intends to plead guilty apparently for taking Broidy’s “gifts.” Broidy paid $75,000 to send Hevesi and his relatives on five trips to Israel, including first-class airfare, luxury hotel accommodations and a security detail, according to several reports.

According to the Wall Street Journal:

A person familiar with the matter at the time said Mr. Hevesi had long expressed a desire to stay at the historic King David hotel, which overlooks Jerusalem’s Old City. Mr. Broidy paid for a stay there, this person said.

Readers of this blog might note how similar this is to the $63,000 trip CalPERS investment officer Leon Shahinian made to New York in 2007. Shahinian’s private jet and his lavish hotel suite were paid for by billionaire Leon Black. At the time, Black and his agent, Al Villalobos, CalPERS was considering investing $700 million Black’s Apollo Global Management. Guess Jerry Brown isn’t as determined to root out pension corruption as Cuomo.

But I digress.

Broidy used his New York connections to leverage an investment in CalPERS. At the time of Broidy’s guilty plea, the LA Times reported that:

In 2003, Broidy mounted a major selling effort to get CalPERS to invest in his firm, according to documents released by CalPERS that report meetings between investment pitchmen and board members. Letters from Broidy to board members indicate that Markstone sought to leverage the New York investment into business with CalPERS, which eventually agreed to invest $50 million in Markstone.

Broidy even brought New York state Comptroller Alan Hevesi with him to a meeting in Sacramento with CalPERS staff to pitch Markstone in 2003. One of those meetings was with then-state Treasurer and CalPERS board member Phil Angelides. Broidy offered to bring Angelides and other California officials to Israel to see its economic strength.

Broidy also cultivated another influential ally at CalPERS, then-state Controller Steve Westly, who also was on the CalPERS board. Broidy had met privately with Westly at least half a dozen times by October 2004, according to Westly’s desk calendar. One of those meetings was at Broidy’s office in Tel Aviv.

Broidy once hosted fundraisers for President Bush and other lavish parties in his Bel Air manse. Bush appointed him to the Kennedy Center’s board and U.S. Homeland Security Advisory Council. He was a trustee of the Los Angeles Fire and Police Pension fund from 2002 until he resigned in May 2009.

He also has ties to San Diego, serving in the 1980s as a money manager for Glen Bell, the late Taco Bell founder and Rancho Santa Fe resident. That a relationship that ended acrimoniously, with Bell accusing Broidy in court papers of cheating him while he suffered from Parkinson’s disease.

Not Funny, Your Honor

September 24, 2010, by Seth Hettena. 0 Comments

The Recorder:

A San Diego judge has been charged with willful misconduct for allegedly videotaping courtroom proceedings to promote herself for a role on a TV show starring a judge.

The Commission on Judicial Performance cited dozens of remarks Judge DeAnn Salcido made, both on film and off, that suggest she was channeling an off-color Judge Judy.

According to the CJP, Salcido had her bailiff’s husband videotape her on the bench presiding over various matters for about an hour back in 2009.

The notice of formal proceedings against her cites an e-mail message from the judge to an entertainment lawyer saying she had been “setting my more interesting defendants and those with substance abuse issues” for a certain day she suggested would be best for filming. …

Salcido repeatedly got participation from her courtroom audience — once having them say “woo woo woo” after accusing a defendant of being high on marijuana.

When one woman admitted to an alcohol and drug use problem, specifically a penchant for vodka, the judge got laughs from the gallery by referencing the Jamie Foxx song by saying, “Blame it on the a-a-a-a-alcohol.”

She told another defendant “they might like your smile in jail,” and on another occasion, told a man she placed on probation: “What that means is don’t come before the court on another case … ’cause you will definitely be screwed and we don’t offer Vaseline for that.” …

Salcido’s statement.

Notice of formal proceedings.

RICO lawsuit filed in SD over NY pension corruption

September 23, 2010, by Seth Hettena. 1 Comment

Pacific Corporate Group of La Jolla, the long-time adviser to CalPERS and other big U.S. pension funds, is accusing one of its former employees “racketeering, illegal kickbacks, betrayal and deceit” for his role in a corruption scandal at the New York State Common Retirement Fund.

PCG and its former officer, Stephen J. Moseley, have locked horns in San Diego County Superior Court, trading charges and counter-charges in an unusually public spat in the staid world of pension management. I’ve posted the documents here.

Moseley fired the first shot by suing his former employer for refusing to pay the amounts he claims he is owed as a former officer. In his complaint, Moseley and his attorneys at Gordon & Rees accuse PCG and its founder, Christopher Bower, of misleading clients:

Defendants, through Christopher Bower, have engaged in a systematic scheme of hiding and concealing material facts from clients regarding investment opportunities which were sponsored by PCG. Once discovered, Defendants’ conduct contributed to the subsequent resignations of all partners in PCG Asset Management, including Plaintiff. In addition, Defendants, through Bower, have made a practice of misleading key PCG clients regarding staff size and turnover of PCG personnel, all in an effort to influence investment decisions in favor of PCG. Moreover, Defendants, through Bower, have fraudulently concealed Bowers’ interactions and relationships with various placement agents and intermediaries; fraudulently concealed Bowers’ interactions and relationships with current and former CalPERS board members including Alfred J. Villalobos; and denied and/or concealed the existence of material conflicts of interest. Defendants, through Bower, have used such acts to influence investment valuations and investment decisions, in order to advance the personal interests of Bower and certain unregistered placement agents in contravention of PCG’s fiduciary obligations.

PCG responded a few months later with guns blazing. It was Moseley, PCG says, who misled his employer by secretly paying kickbacks to officials at the New York state pension fund as a reward for in exchange for participating in a joint venture seeded in 2006 with $750 million from the New York State Common Retirement Fund. Moseley resigned shortly before the money was committed.

PCG last year settled with New York Attorney General Andrew Cuomo by forfeiting $2 million in fees that it earned from the New York state pension fund. The La Jolla money management firm says it settled because it can be held liable for an employee’s actions even if it was unaware of them.

Moseley’s allegations, PCG says, are the most recent example of a competitor seeking to do it harm by making false and defamatory allegations. According to PCG’s lawsuit, Moseley’s greed was the real reason he left the firm and if anything, he has been overpaid. Moseley threatened his former employer with “adverse publicity and injury to its reputation” if he wasn’t paid what he says he was owed.

PCG and its law firm, Sullivan, Hill, Lewin, Rez & Engel, filed its counter-claim under the Racketeering and Corrupt Organizations statute. The RICO statute carries the threat of treble damages, punitive damages and the right to recover attorney fees and litigation costs. Very few of these cases ever make it to trial because of the tremendous sums that are at stake for both sides.

Moseley’s conduct resulted in “tens of millions of dollars in damages,” and those damages would potentially be trebled under the RICO statute. In addition, PCG says it will seek punitive damages and attorney fees from Moseley.

You can decide for yourself by reading Moseley’s first amended complaint and PCG’s counterclaim:

Moseley v. PCG

A Good Dose of Schadenfreude

September 22, 2010, by Seth Hettena. 0 Comments

Subject: PCG / CalPERS
From: A Reader
To: seth@sethhettena.com

Just wanted to say keep up the good work. Not sure how many people are picking up on the coverage but it is good for a dose of schadenfreude for those of us that have dealt with these people.

The anonymous email saying you are on to more than you realize was not exaggerating. This behavior has gone on for years at PERS before Leon as well as plenty of other pension plans and their consultants.

Pacific Corporate Group Disclosure Letter to CalPERS

September 15, 2010, by Seth Hettena. 0 Comments

PCG Disclosure Letter to CalPERS

Background 1 2 and 3.

Cleaning House, CalPERS Dumps Pacific Corporate Group as Advisor

September 12, 2010, by Seth Hettena. 0 Comments

Dale Kasler reports in Sunday’s Sacramento Bee that CalPERS is “rethinking” its ties to Pacific Corporate Group of La Jolla, which screened private equity deals for the pension fund for the past 20 years.

For 20 years, when CalPERS needed advice on a big investment, it often called on Christopher Bower, founder and chief executive of a firm called Pacific Corporate Group.

Now this confidant from La Jolla might get pulled into the bribery scandal at the nation’s largest public pension fund.

Alfred Villalobos, the man at the heart of the scandal, worked on deals for Bower. And when CalPERS was thinking of firing Bower’s firm in early 2007, Villalobos – a former CalPERS board member – stepped in and negotiated a delicate agreement that saved the relationship.

Months later, Pacific Corporate advised CalPERS on two investments that earned Villalobos fees totaling $17 million.

Bower never hid his relationship with Villalobos. He sent CalPERS a letter about it before the investments with Villalobos’ clients were made. CalPERS concluded the arrangement was fine.

As of June 30, the firm no longer screens deals for CalPERS, ending a role it filled since 1990.

“Their contract expired and it was allowed to lapse,” said CalPERS spokesman Brad Pacheco.

Bower’s firm still directly manages about $1 billion of CalPERS’ money. But that’s being examined, too, as part of a larger review of CalPERS’ investment partners, said Joseph Dear, chief investment officer at the California Public Employees’ Retirement System.

Leon Shahinian’s $63k Big Apple visit

September 8, 2010, by Seth Hettena. 0 Comments

“I believe you’re on to more than you realize.”

So reads an e-mail redirecting my attention to some of the CalPERS court documents I posted online last month.

My anonymous correspondent is a former advisor to the CalPERS board who points out some interesting details buried in the hotel bills from CalPERS senior investment official Leon Shahinian’s $63,000 trip to New York City in 2007.

California Attorney General Jerry Brown’s office has cited this trip as an example of the corrupt practices of Al Villalobos, a former CalPERS board member who went into business as a lobbyist for money managers seeking to do business with the giant California pension fund. One of Villalobos’ clients was Leon Black,  the billionaire founder and controlling shareholder of Apollo Global Management.

In 2007, while Villalobos was trying to persuade CalPERS to purchase a 10 percent equity interest in Apollo Global Management for $700 million, Shahinian accepted Villalobos’ invitation to travel by private jet to New York City to attend a fund-raising event hosted by none other than Leon Black.

Apollo covered the $63,000 cost for Shahinian’s New York trip. The following month, Shahinian, who oversaw the CalPERS private equity portfolio, urged the pension board to approve the investment in Apollo, which it did.

When their private jet touched down in New York, Villalobos and Shahinian were met by a limousine arranged for by Aurora Capital, a private equity fund headed by Villalobos’ client, Gerry Parsky, a GOP heavyweight and Bush’s California majordomo.

The limousine ferried Shahinian and Villalobos to a ridiculously overpriced $7,000-a-night two-bedroom suite at the Mandarin Oriental hotel in New York.

Here’s what my sharp-eyed reader has called my attention to:

  1. The hotel bill shows that calls were placed from the $7000-a-night suite to the Dallas offices Unity Hunt Inc., the private investment firm of billionaire Lamar Hunt.  These also were the offices of Barrett Wissman, a hedge fund manager, “classical music impresario” and friend of the Hunts and their fortune who pleaded guilty last year in a kickback scheme involving the New York state retirement fund.
  2. The Mandarin Oriental bill also shows that several calls were placed to the phone of another Villalobos client, Chris Bower at Pacific Corporate Group as well as a call to Bower’s staff.  What’s troubling about this is that in 2007, CalPERS was relying on PCG to independently vet investments in Apollo and Aurora. Bower would go on to urge the CalPERS board to invest in Apollo the next month. Also in mid-2007, Bower and Villalobos were trying to get CalPERS to buy into Pacific Corporate Group.
  3. The day after meeting Black at the MOMA, a limousine (courtesy of Parsky) ferried Shahinian and Villalobos for lunch the next day to Dock’s Oyster Bar & Seafood Grill at 633 Third Ave. The location of this restaurant is worth noting, my source points out: It also happens to be in the lobby of the building housing the executive offices of New York State Comptroller who single-handedly oversaw the New York state retirement fund. The NY CRF has been a target of an ongoing pay-to-play investigation of former Comptroller Alan Hevesi.

In other words, the records of the Shahinian/Villalobos trip shows how the pension world truly operates:

  • a) CalPERS staff were bribed with lavish, travel and perks paid for by the money managers seeking the pension’s money;
  • b) CalPERS’ supposedly independent consultant, Pacific Corporate Group may have been pursuing its own self-interest instead of the pension’s; and
  • c) if the links to Wissman/the Hunts and the New York pension fund are more than just coincidence, it places Shahinian or Villalobos in a corrupt nexus that extended from coast to coast.

Duke to Judge: “You can only push a man so far, your honor”

September 7, 2010, by Seth Hettena. 1 Comment

The gigantic ego that is former Rep. Randy “Duke” Cunningham has written an angry letter to his sentencing judge, complaining that the IRS is “killing” him and his family by seizing his remaining savings. Cunningham insists that as a highly decorated veteran, he deserves far better.

Read Duke’s Letter (.pdf)

Writing from his minimum security Arizona prison, Cunningham tells Judge Larry Burns that he never would have pleaded guilty to taking bribes from a defense contractor and evading taxes in 2005 had he known the IRS — which he refers to at one point as the “KGB IRS” — would “renig” (sic) on the agreement and “keep me in poverty for the rest of my life.”

The IRS has taken everything I have worked for during my nearly 70 years. They have taken over or we have paid over 2.75 million dollars in assets, cash homes, cars, earnings and retirement. After 40 years teaching, my wife is living hand to mouth & staying in her 2-bedroom grandmother’s home. You can only push a man so far your honor. As one of the most highly decorated veterans in the history see note of this nation and a lifetime of service yes I made mistakes but that does not include killing me and my family.

Judge Burns responded to Cunningham in a letter dated Aug. 4, explaining that the money confiscated from Cunningham’s retirement and congressional pension was seized by the IRS to collect back taxes owed on the bribes he received in 2003 and 2004.

Duke’s defense attorney, K. Lee Blalack, had no comment.

The IRS found that Cunningham owed more than $1.13 million in back taxes, penalties and interest. The IRS is collecting this in 686 installments of $1,647 seized from Cunningham’s congressional and navy retirement benefits, his Social Security check, and his savings account, which contained $84,423.64.

Cunningham must also pay an additional $1.8 million in restitution to the IRS.

In the letter, Duke also accuses prosecutors in San Diego of lying over the reasons why he was never called to testify at the 2007 trial of defense contractor Brent Wilkes, who was convicted regardless of bribing Cunningham with cash, luxury travel and prostitutes. Wilkes is out on bond and playing poker while he appeals his 12-year sentence.

Duke’s missive to the judge follows his unsuccessful effort earlier this year to have his 100 month sentenced reduced for the ”substantial assistance” he provided to the government. Defense lawyers say this assistance includes Duke’s willingness to phone to a co-conspirator, Thomas Kontogiannis, in calls that were recorded by the FBI and a willingness to testify at Wilkes’ trial.

In a July 28, 2008 letter to Blalack, U.S. Attorney Karen P. Hewitt acknowledged that Duke and his attorneys met repeatedly with federal authorities. Prosecutors say that they too did their best to extract substantial assistance from Cunningham. “Time and time again, however, he fell short of this goal,” prosecutors wrote.

Part of the problem was Cunningham’s inability to tell the truth without exaggerating, embellishing or minimizing his own conduct:

Moreover, Mr. Cunningham’s efforts were greatly tempered by the fact that many of our meetings with him were necessitated by his apparent retreat from the factual basis of his own plea agreement. See e.g., Letter to Wayne Winters, dated May 2, 2006, (“not all of what the press claimed was true or what I had to plead to — But [I] had to take the whole plea or nothing.”) At the opposite end of the spectrum, we were concerned that he would embellish facts if he thought doing so would improve his prospects for a sentencing reduction, as he did on at least one occasion…. In addition, his lack of candor before and after his plea (one example of which was the $50,000 in cash he left for his wife on the eve of his sentencing hearing) and the egregiousness of his crimes, presented the real risk that whichever side called him as a witness would be irreversibly tainted by such association. This may explain why Wilkes did not call him either, notwithstanding his counsel’s promise to do so.

Footnote:

Back to post This is yet another example of Cunningham’s well-known propensity to exaggerate his own accomplishments. He is NOT one of the most highly decorated veterans in U.S. history. He is not among the 3,446 recipients of the Medal of Honor, the highest award given for valor in combat. He received the Navy Cross, the second highest such honor.

Brent “The Enigma” Wilkes surfaces in attack ad

September 1, 2010, by Seth Hettena. 0 Comments

Free on bond, Brent “The Enigma” Wilkes is spending time at the poker table these days, but his scandalous past is featured in a new attack ad in Missouri’s Senate race.

Wilkes is referred to in the ad by Missouri Democrat Robin Carnahan he “defense contractor convicted of bribery” who provided private jet trips for her GOP opponent, Rep. Roy Blunt, the former House whip.

PoliticMo.com has the story here:

“One of the examples we touch on in the ad is the example of Brent Wilkes, the California defense contractor and lobbyist,” said Mindy Mazur, campaign manager for Robin Carnahan, in a conference call with journalists Wednesday. “Blunt – while he was there – helped whip the vote in favor of one of his companies.”

Mazur says, “Eight days later, Congressman Blunt received $14,000 from people associated with Brent Wilkes.”

While she says “he spent over 100,000 in legal fees related to the Wilkes case,” Mazur wasn’t sure if he had actually done anything illegal. “I would have to say the more we’ve learned about what congressman blunt’s been up to in washington, the more we’ve asked the same question [of legality].”

Wilkes was sentenced to 12 years in prison in 2008 following his conviction on charges of bribery, money laundering and fraud. He was freed while his case is being appealed to the 9th U.S. Circuit Court of Appeals.