CalPERS Placement Agent Alert
State Ethics Agency Focuses Enforcement Efforts on "Gifts" Made
to CalPERS Board Members and Employees
The state agency which enforces California's lobbying and ethics laws (the Fair Political Practices Commission or "FPPC") has launched a wide-ranging investigation into "gifts" purportedly given to nearly 50 CalPERS Board members and employees over the last few years. Those under investigation include CalPERS Board members Rob Feckner, George Diehr and J.J. Jelincic and Chief Investment Officer Joseph Dear. The investigation concerns alleged failures by the CalPERS Board members and employees to properly report the gifts they received on their annual "Statement of Economic Interests" (Form 700), as required by state law, as well as accepting gifts in excess of the annual limit.
State law normally limits gifts to CalPERS Board members and employees to $420 per year from any one source. However, investment firm employees registered as state lobbyists pursuant to AB 1743 (i.e., a firm's "in-house placement agents") may only make gifts valued at $10 per month to any CalPERS Board member or employee. Moreover, CalPERS' internal policy further prohibits CalPERS employees from accepting any gifts from firms doing business or seeking to do business with the agency. Some CalPERS Board members and employees evidently received gifts in excess of these limits, probably unknowingly.
It is unclear what triggered the FPPC investigation. Citing the agency's confidentiality policy, the FPPC would only say that they have interviewed certain CalPERS Board members and employees and would likely begin issuing fines in the next few months. It is also unclear what specific gifts are at issue in these matters. Importantly, the state law definition of a gift subject to these rules is very broad, and includes anything of value benefitting the Board member or employee - such as meals and beverages a CalPERS official might receive at an investor conference, payments for travel to such events, tickets to entertainment or sporting events, etc.
What is clear is that this investigation reflects the FPPC's increasing scrutiny of CalPERS, particularly in light of recent ethics scandals and new state laws concerning placement agents. In this environment, investment firms soliciting or doing business with CalPERS must be sure to carefully comply with all applicable ethics rules.
If you believe that you or your firm may have made a gift to one of the Board members or employees under investigation, or may make a gift to a CalPERS/CalSTRS official in the future, or if you have any questions about California lobbying and gift laws, please feel free to contact Jim Sutton, Jesse Mainardi, Kevin Heneghan, or Brad Hertz.
THIS ALERT IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE.