Are graft and fraud the next big thing for state pension plans? An industry segment already beset by massive underfunding, bankruptcy court proceedings and other litigation, politics and pension envy doesn’t need any more bad news. But that may be exactly what it gets.
The former chief executive of CalPERS has confessed to receiving $200,000 in cash, along with a series of other bribes, from a Lake Tahoe businessman who was attempting to influence billions of dollars in investment decisions by CalPERS. Fred Buenrostro, who ran the nation’s largest public pension fund from 2002 to 2008, pleaded guilty in a U.S. district court to a charge of conspiracy to commit bribery and fraud. Buenrostro will be sentenced in January, and faces up to five years in jail and a $250,000 fine.
Meanwhile, it was reported July 11 that Arizona’s Public Safety Personnel Retirement System (PSPRS) will terminate the contract of the administrator of its $7.9 billion pension trust for police, firefighters, election officials and prison guards. His offense: giving raises to five PSPRS employees in violation of state law — retroactive to July 1, 2013 and with cost-of-living adjustments to boot.
The developments in California and Arizona follow talk in North Carolina about switching from a sole trustee for the state’s $87 billion state pension system to a board, in the wake of a report by Benchmark’s Ted Siedle that found high fees paid to private equity and hedge fund firms, under-performance and a lack of transparency.
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