The Los Angeles Times reports that CalPERS’ outside consultant Grove Street Advisors had rejected a proposal to invest in Healthpoint Partners LP prior to Westly’s involvement, saying it did not fit its strategy of investing in high-tech firms. Westly, a member of the CalPERS board, took interest in Healthpoint in the spring of 2003, and within a year, its partners had helped his campaign funds grow by more than $50,000 while securing a $5 million investment from CalPERS.
One of Healthpoint’s managing directors was Joseph Cari, who pled guilty to a charge of attempted extortion relating to an alleged kickback scheme involving private firms wanting to invest money for the Illinois Teachers’ Retirement System (See Attorneys Indicted In IL State Pension Scandal).
Westly’s involvement in the investment decision did not take place in public meetings, but rather in private, over restaurant lunches and in e-mails, according to the LA Times. When confronted Westly told the Times, “I want to make sure we do everything we can to maximize the returns to our pension funds. I’m always looking out for firms I think can provide above-average returns, and I do that from time to time.”
His campaign spokesman, Nick Velasquez, told The Times Westly will return $15,000 donated directly by Healthpoint employees and their relatives “out of an abundance of caution.” CalPERS spokeswoman Pat Macht said everything about the Healthpoint investment was done by the book. She said CalPERS staff had made other investments in firms rejected by outside experts, and the staff did not feel pressure from Westly to put CalPERS money in Healthpoint. “When we looked at it a year later, the investment staff thought they had an interesting strategy,” Macht said.
However, corporate governance officials say Westly’s actions were questionable.
In the CalPERS memo in August informing the board about the Illinois indictment, the staff noted that there was no indication that Healthpoint participated in the scheme, and that they did not expect the indictment to have a negative impact on the fund’s performance.
CalPERS maintains its investment in Healthpoint.