The $208 billion California Public Employees’ Retirement System (CalPERS) has launched an ethics helpline and revealed plans to establish an office of enterprise risk management as part of its ongoing efforts to boost governance measures and restore credibility in the wake of a private equity-related scandal.
“Recent events on Wall Street, pension fraud in this state, and even allegations of wrongdoing at CalPERS have taught us that managing risk and ensuring accountability across the enterprise are critical to our effectiveness today and tomorrow,” George Diehr, who was acting president of CalPERS’ board at its September meeting, said in a statement.
The “whistleblower” telephone helpline will allow people to share information on any suspected wrongdoing. It will be operated 24 hours a day by hotline management company Ethics Point, and is also available online.
Recent events on Wall Street, pension fraud in this state, and even allegations of wrongdoing at CalPERS have taught us that managing risk and ensuring accountability across the enterprise are critical to our effectiveness today and tomorrow.
CalPERS CEO Anne Stausboll noted the office of enterprise risk management would oversee all risk management activities including internal compliance, privacy, disaster recovery and business continuity programmes. The unit will be led by an enterprise chief risk officer, assisted by a senior level executive.
“We strive to be the very best at risk management,” Stausboll said in the statement.”We will ensure that we ask the important questions, challenge our own assumptions, and hope to become the best at utilising this discipline to understand and manage threats that could hamper our ability to deliver the best services to our members and employers.”
Dier noted these were the latest of a series of measures the pension has initiated in the past year to “restore confidence, integrity and accountability to all that we do”.
In May, California Attorney General Jerry Brown filed a $95 million civil suit against Alfred Villalobos, a former CalPERS board member who went on to launch placement firm ARVCO, for alleged fraud in his dealings with the pension. Brown is also suing ARVCO and former CalPERS CEO Federico Buenrostro.
Villalobos has denied wrong-doing and said in bankruptcy court he planned to sue CalPERS for $10 million for making false statements about his dealings with the pension.
Leon Shahinian, who has headed CalPERS’ private equity programme since 2004, was placed on administrative leave in May. He is not named in the suit, though it describes a lavish trip paid for by Villalobos that Shahinian took to New York to meet Apollo founder Leon Black. Following that trip, Shahinian allegedly “recommended” a $700 million investment in Apollo Global Management without disclosing the “all expenses paid” jaunt.
Last year, CalPERS began an investigation into placement fees paid by its managers to third-parties. In its statement revealing its latest risk management measures, CalPERS described its review as “the pursuit of information … to ensure CalPERS has not been victimised by placements agents”.
Other measures CalPERS said it has taken to boost risk management and governance over the past 12 months include a ban for employees on gifts from potential and existing business partners and co-sponsorship of AB 1743, a bill recently passed in California requiring placement agents to register as lobbyists and accept a flat fee for services.