The Sacramento Bee offered a glimpse behind the curtain of how big-time private equity investors get wooed by major private equity firms. Trouble is, much of the details are being disclosed as a result of a lawsuit filed against those involved.
California Attorney General Jerry Brown filed suit last month alleging that a $601 million investment by Cal-PERS, the state’s pension fund, was inappropriately influenced by placement agent Alfred Villalobos.
Villalobos reportedly flew a senior investment officer of the pension fund, Leon Shahinian, to New York City on a private jet to attend mega-gala featuring celebrities such as Martin Scorsese and Caroline Kennedy. The junket included putting him up at a five-star hotel, paying his ticket for the $2,000-a-ticket event at the Museum of Modern Art, and gifts afterward.
Shahinian later recommended that Cal-PERS invest in Villalobos’ client’s private equity fund, Apollo Global Management, a Wall Street firm which had Villalobos under contract to secure investments from the pension fund.
That $601 investment netted Villalobos a cool $13.2 commission, reportedly the biggest of his 15-year career as a placement agent. The lawsuit also alleges that Villalobos offered other top officials at Cal-PERS plane rides, hotel rooms, condominiums, and even paid for the wedding of one former Cal-PERS chief executive.
Apollo has since promised to stop using placement agents in its dealings with the Cal-PERS fund. The firm also maintains it has done nothing wrong or illegal.
What’s your take? Is this simply business as usual in the big leagues of big-time private equity fundraising? Or do regulators need to crack down on this type of activity? Add your comments below.
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