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Calpers to review relationship with private equity firm Markstone
  Hedgeweb - FRI, DEC 04 2009
Funds & Investment The California Public Employees?? Retirement System (Calpers), the biggest U.S. pension fund, said its is evaluating its relationship with Markstone Capital Partners, after the chairman of the California private equity firmpleaded guilty on Thursday to charges that he helped his firm win a $250m investment with New York State??s huge public pension fund by making nearly $1m in illegal gifts to state officials.

A Calpers spokesman told The Los Angeles Times that it has asked a Washington legal adviser conducting an investigation of the pension fund??s relationships with investment managers to look into Markstone??s dealings with the board and staff. Elliott Broidy, who entered the guilty plea in State Supreme Court in Manhattan, is the latest in a string of private equity executives and investment advisers charged in connection with the New York attorney general??s investigation of a pay-to-play scandal in the office of the former state comptroller, Alan G. Hevesi. Calpers, which oversees $200 billion, invested $50 million with Mr. Broidy??s firm, The Los Angeles Times said. As part of a full-court press to get Calpers to invest in his firm in 2003, Mr. Broidy sought to leverage the New York pension fund investment into business with Calpers, the newspaper said, citing documents released by Calpers that report meetings between investment pitchmen and board members.

Mr. Broidy even brought New York state Comptroller Alan Hevesi with him to a meeting in Sacramento with Calpers staff to pitch Markstone in 2003, The Los Angeles Times said.

Mr. Broidy and his wife also ponied up almost $900,000 over the past ten years in campaign contributions to officials seeking statewide offices, including donations to two Calpers board members, according to the newspaper.

In October, the California fund launched an internal investigation into fees that outside money managers had been paying to win business.

Mr. Broidy has resigned from all operational and supervisory roles at Markstone, one of the largest private equity firms investing in Israel.

As part of his plea bargain, Mr. Broidy has agreed to forfeit $18 million. He was freed on bail after entering his plea on Thursday and will be allowed to travel, with restrictions. He could get up to four years in prison, but his cooperation could lead to a lighter sentence.

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