Harrington quits public pension board
As a member of the powerful Los Angeles Fire and Police Pensions board, Sean Harrigan’s private financial life intersected repeatedly with the business of his agency, which oversees a $10.7-billion portfolio on behalf of retired public employees.
Long before he was caught up in a national investigation into the way public pensions are managed, Harrigan took a consulting job with a law firm that was applying to get work from his board, records show.
The pension board president also secured consulting work with a well-connected Los Angeles company two months after he voted to invest $20 million in two of its clients. Even his residence was linked at one point to a company with business before his board.
Weeks before he was appointed by Mayor Antonio Villaraigosa, Harrigan changed his voting address from the city of Corona to Los Angeles, renting an apartment from the real estate company CIM Group. Four months later, he voted to invest $30 million in public pension money in one of CIM’s urban real estate funds.
Harrigan, 63, resigned his volunteer post on Thursday, becoming the first California official to step down because of the growing inquiry into public pension funds by New York Atty. Gen. Andrew Cuomo and the Securities and Exchange Commission. Last month, the SEC asked Harrigan to identify income he received from pension board consultants and contractors. Board member Elliott Broidy resigned hours after Harrigan.
In an interview, Harrigan insisted that he has done nothing wrong. He said he behaved ethically throughout his 3 1/2 -year tenure and recused himself from voting when conflicts arose. “My responsibility first and foremost has been to the beneficiaries of the fire and police pension system,” he said.
Still, one of Harrigan’s potential conflicts was considered so problematic that Los Angeles City Atty. Rocky Delgadillo instructed the pension board to undo a decision that favored one of Harrigan’s clients, the law firm of Grant & Eisenhofer.
Harrigan, a longtime executive with the United Food and Commercial Workers, became a consultant to the law firm on May 1, 2007, agreeing to introduce members to labor unions across the country, according to Jay W. Eisenhofer, the firm’s managing partner.
Two days after that consulting work began, Harrigan publicly complained to Delgadillo’s lawyers that he and his colleagues were being excluded from the search process to select several outside law firms to handle securities law cases for the pension board. Delgadillo’s office had received proposals from 15 firms, including Grant & Eisenhofer, and eventually planned to ask the board to approve a pool of five that could be used on an as-needed basis.
“We’d like to see the list of 15 and provide you with our input with respect to that list of 15 -- the firms we think maybe shouldn’t be considered, or maybe the firms that should be,” Harrigan said, according to an official recording of the meeting.
At a board meeting in July, city lawyers presented a list of nine finalists -- and Grant & Eisenhofer was among them.
Harrigan did not publicly disclose his work for the law firm until four months later, speaking up minutes before his colleagues were slated to vote for the Delaware-based firm. Although he recused himself, city lawyers were so concerned about the legality of the vote that they came back two weeks later, on Nov. 15, 2007, and instructed the board to drop Grant & Eisenhofer from the legal pool.
The city’s ethics law bars commissioners and board members from negotiating employment with companies that have business pending before their agencies.
Eisenhofer, the firm’s managing partner, told The Times that before his firm hired Harrigan, it specifically asked him whether his duties on the pension board would complicate its effort to secure work at the agency.
“The answer we got . . . was that we weren’t going to be precluded -- he would just have to recuse himself, and that it’s the kind of thing that corporate boards do all the time,” Eisenhofer said.
In an interview with The Times, Harrigan said he did not violate the city’s ethics law because he was seeking to become a paid consultant to the firm, not a direct employee. “I didn’t look at it as an employment contract. I looked at it as a consulting contract,” said Harrigan, who said the two types of agreements are “very, very different.”
Harrigan was picked by Villaraigosa in August 2005, months after he concluded a turbulent two-year tenure as president of the California Public Employees’ Retirement System board, the nation’s largest public pension fund.
While he was on the CalPERS board, Harrigan was living in Corona. But three weeks before he was named by Villaraigosa to serve on the fire and police pension board, Harrigan registered to vote at an apartment on Flower Street in downtown Los Angeles, according to county officials.
The City Charter requires volunteer commissioners and board members to be registered to vote in Los Angeles. Harrigan said his wife still resides in Corona but he lives in Los Angeles, visiting her on weekends.
Harrigan said he rented his apartment from CIM Group in July 2005 as part of his effort to create a Los Angeles-based consulting firm. When he voted on CIM’s real estate trust four months later, Harrigan saw no need to recuse himself, he said.
“I never thought it was an issue,” said Harrigan.
As he finished his first year on the board, Harrigan agreed to consult with Yucaipa Cos., an investment fund created by supermarket magnate Ron Burkle, and Wetherly Capital, which acts as a placement agent -- similar to a lobbyist -- in promoting investment opportunities to pension agencies.
Harrigan voted on June 1, 2006, to invest $10 million in two Wetherly clients. In mid-August, he was hired as a consultant to Wetherly, advising it on strategies at pension agencies outside of California.
Harrigan said that work ended on Dec. 31, 2006, and that for one year -- as city ethics law requires -- he recused himself from voting on investment proposals pitched to his agency by Wetherly.
Harrigan did vote twice, however, on one client that Wetherly represented on other investment matters: CityView, the real estate fund founded by former cabinet secretary Henry Cisneros, was given $25 million by the Los Angeles board in the spring of 2007.
CityView vice chairman Victor Miramontes said the proposal that Harrigan voted on had no affiliation with Wetherly. But CityView had retained Wetherly during the same time period to advise it on a separate investment opportunity that it planned to pitch to pension agencies.
Harrigan’s attorney, Mark Byrne, said Wetherly’s other work for CityView at the time was not relevant to the board’s vote.
“If and when something came before the board with Wetherly [as a placement agent], he recused himself,” Byrne said.
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