California AG Steps Up Pension Corruption Investigation

May 26, 2009 ( - California Attorney General Jerry Brown issued subpoenas to politically connected firms and individuals as part of a probe into placement agents who help secure pension fund investment contracts for their clients in return for pay, sources familiar with the investigation told the Los Angeles Times.

The subpoenas were issued to Gold Bridge Capital and Wetherly Capital — both run by former fundraisers for former Governor Gray Davis and former pension official Sean Harrigan, according to sources. The subpoenas seek information on the use and disclosure of placement agents and potential conflicts of interest, said the sources who spoke on the condition of anonymity because they were discussing an ongoing investigation. Brown’s spokesman, Scott Gerber, declined to comment, the Times said.

The nationwide probe began in New York and has spread to numerous other states (see Cuomo Announces Multi-state Effort on Pension Abuse). Earlier this month former Wetherly employee Julio Ramirez Jr. pleaded guilty to securities fraud and agreed to cooperate in the New York investigation (see Ramirez Enters Pension Probe Guilty Plea).

A person familiar with the California investigation told the Times Brown pulled back on delivering a subpoena to equity investor and fund manager Elliott Broidy, after he volunteered to talk with the attorney general’s investigators. Broidy and Harrigan, both appointees of Los Angeles Mayor Antonio Villaraigosa, recently resigned their posts on the Los Angeles Fire and Police Pensions board after they were contacted in a related U.S. Securities and Exchange Commission inquiry (see Harrigan Resigns from LA Pension Board).

The nationwide investigation has led several states and pension funds to institute placement agent rules, and the Securities and Exchange Commission is formulating regulations (see NYC’s Thompson Backs SEC Private Placement Agent Regulations ).