On The Money: Pension Scandal
By Mike Luery
SACRAMENTO (CBS13) -- A corruption scandal at CalPERS is causing huge shockwaves that could affect the battle over pension reform in California.
CalPERS released a report and press release addressing its own internal investigation into a bribery scandal, in which politically connected insiders were able to manipulate the giant retirement fund into investing billions of pension dollars.
CalPERS admitted to losing tens of millions of dollars from the retirement fund due to the scandal involving former top executives and investment officers.
Critics were quick to pounce on the troubled pension fund.
"It's no surprise that you'd find criminals at the top of a Ponzi scheme," state Dan Pellissier, president of California Pension Reform. Pellissier's group wants to bring pension reform to the California ballot next year. Read more
If it qualifies, the initiative would appear on the June 2012 ballot. The major reforms include:
• Capping benefits for future and current government workers
• Tying benefits to what people make in the private sector
• Shaking up public pension boards with independent members, who have no stake in the plan
"This scandal never would have happened if you had independent people who represent taxpayers and who knew the difference between taking gifts and making good decisions," Pellissier told CBS13.
CalPERS commissioned the independent investigation and said it has learned a valuable lesson.
"We have many corrective actions that we have underway," said Pat Macht, External Affairs Director. Macht told CBS13, "We've set up an anonymous ethics hotline that anyone who believes there may be wrongdoing can call us."
In addition, a new law requires placement agents to be registered as lobbyists, Macht said.
"We went back and talked to many of the investment managers and we've gotten back a significant amount of money," Macht told CBS13. CalPERS says it has recovered more than $200 million from those managers.
Californians for Health Care and Retirement Security, a group supported by public employee unions, countered by saying corruption also exists in the private sector.
"This doesn't light a candle to the corruption and ripoffs on Wall Street and in big banks that would profit from the gutting of California's public pension system. Using it as a political weapon will backfire on the proponents. CalPERS is financially sound and voters don't want California to become Wisconsin."
The bottom line is that pension reform remains the key sticking point for a budget deal at the Capitol. Tomorrow, the Assembly and Senate have scheduled floor votes on Governor Brown's budget which includes cuts and tax extensions for the June ballot – but no pension reform.
