L.A. bash raises ethical questions

When Robert Aguallo Jr. retired as general manager of Los Angeles’ largest city pension agency, he went out with a flourish rarely afforded such department heads at City Hall.

Six weeks before he left government, Aguallo staged an elaborate send-off for himself at the California Club, where attendees paid $1,000 or more per person to dine on crab cakes and filet mignon -- with proceeds going to a scholarship that would bear his name.

To drum up contributions, he hired a party planner, providing her with lists of potential donors. Included were dozens of business leaders who had sought or secured millions of dollars from the pension fund during the five years he ran it.

Using the city’s e-mail system, Aguallo hit up a few donors himself, asking them to sponsor a table for as much as $10,000. At least four other city employees also took time from their workdays to organize the bash.

Details of the March 27 event appear in nearly 400 city e-mails from the Los Angeles City Employees’ Retirement System, or LACERS. The messages, obtained by The Times under the state’s public records law, show LACERS employees performing an array of party-related tasks, such as choosing the menu and reviewing the inscription planned for a commemorative “whisper cut” crystal bowl.

Aguallo’s employees also participated in party planning conference calls, created a five-minute tribute video, reviewed the souvenir program and gathered names of potential donors from their agency’s lists of consultants, brokers and other pension professionals.

Under the city’s ethics laws, department heads are allowed to collect charitable contributions from city contractors. Such contributions would become illegal only if those contractors received city business in exchange for their donations.

Still, one government watchdog criticized the party, saying companies that wanted to keep doing business with the pension system would have felt pressure to buy tickets.

“The more I learn, the more troubled I am,” said Robert Stern, president of the nonprofit Center for Governmental Studies. “It’s clear that people feel obligated to give to charities when there are people in positions of power who are asking for the money.”

Aguallo is currently under investigation by the city’s Ethics Commission over his decision to take a job in April with Cardinal Americas, a firm that had received help from his agency only two months earlier. On May 6, only days after he retired, Aguallo sent e-mails to LACERS trying to influence the amount of fees the city would pay to Cardinal Americas, a move that may have violated the city’s “revolving door” ban on lobbying by recently departed city workers.

Aguallo attorney Fred Woocher defended his client’s retirement party, saying he “wasn’t very involved” in the event. Woocher said Aguallo planned to retire weeks before the party but stayed longer as officials searched for his replacement.

“I don’t get what the big problem is,” he added. “It happens all the time. If you want to raise money for a charity, you pick an honoree and then you use that person to hit up anyone they know that has money.”

At least one city worker sounded ambivalent about being assigned to attend and work the party, lamenting in an e-mail to a colleague that she would likely have to stay until 1 a.m. -- 90 minutes after it was scheduled to end. “I think they’re having dancing and a dance floor (god knows why),” wrote pension system employee Debra Fleming.

LACERS manages a $10-billion portfolio on behalf of 45,000 current and former city workers.

Aguallo’s retirement bash raised money for a “Robert Aguallo Jr.” scholarship to be administered by the Robert Toigo Foundation, a nonprofit that encourages minority students to seek jobs in finance. Toigo said in a statement that it was honored to receive the money from Aguallo, who is vice president of the group’s board.

Emceeing the party were pension board president Eric Holoman, an appointee of Mayor Antonio Villaraigosa, and pension board vice president Shelley Smith, a lawyer in the office of City Atty. Rocky Delgadillo who also serves on Toigo’s board. Financial professionals whose companies had appeared before Holoman and Smith were asked by party organizers to pay $5,000 for a table of three or $10,000 for a table of five -- sponsorships that gave them entry to a VIP pre-dinner reception.

City Hall retirement parties are typically staged on a considerably smaller scale, with invitations posted on city bulletin boards and attendees paying between $30 and $60 to cover a meal and a gift. Aguallo’s event, by contrast, took in at least $150,000, according to documents and interviews, two-thirds of which went toward the scholarships. The rest, according to one e-mail, covered expenses.

Aguallo built a reputation as a champion of efforts to steer pension money to minority-owned companies and to recruit minorities and women into the traditionally white, male world of finance.

At least 16 companies that provide services to the pension agency bought tables at the party, according to e-mails. Five of those benefited from a program Aguallo set up to invest in ventures often overlooked by the larger market, such as urban real estate, “green” technology or businesses in “under-served” communities.

One beneficiary of the program has been Palladium Equity Partners, which received a commitment of up to $10 million from the pension board in 2005. Palladium, which gave $10,000, targets companies that capitalize on “the overall Hispanization of the U.S. society,” according to its website.

Another $10,000 sponsor was the real estate fund known as CityView, which is run by former Housing and Urban Development Secretary Henry Cisneros. CityView received a commitment of up to $25 million last year from LACERS.

CityView Vice President K. Forrest Beanum said his company had a long track record of giving to Aguallo’s favored nonprofit. “We’re a 65% ethnic minority firm ourselves, and this is a stellar pipeline for getting more representation in the financial markets,” he said.

A third $10,000 table was secured for Cordoba Corp., whose principals run Cardinal Americas, a start-up fund that received a commitment of $10 million through Aguallo’s initiative.

The pension board voted in March 2007 to invest in Cardinal Americas as long as the new fund showed that it had raised $50 million from other sources. When the company failed to do that after a year, the pension board agreed to give it a six-month extension.

In the weeks leading up to that vote, Aguallo asked Cardinal Americas Chairman George Pla to help him beef up his party’s guest list by persuading former Los Angeles City Councilman Richard Alatorre, now a City Hall lobbyist, to attend. Pla did so and, in a separate e-mail, said his company would sponsor a table.

“Please let me know if you need help with the mayor,” he added.

Villaraigosa did not attend. But Deputy Mayor Sally Choi -- the person named as Aguallo’s replacement -- received a complimentary ticket. “I can assure you that no investment decisions were at all based on what may or may not have happened at that retirement party,” she said.

Weeks after his exchange with Pla, Aguallo sent an e-mail to a high-level aide asking if Cardinal Americas’ request for a six-month extension could bypass the agency’s investment committee, where financial proposals receive more exhaustive review. The pension aide said no.

In May, LACERS’ acting general manager warned pension board chairman Holoman that Aguallo’s work on behalf of Cardinal Americas might constitute a conflict of interest. Within weeks, investigators from the city’s Ethics Commission began interviewing LACERS employees about Aguallo.

Although the party planner sent out many of the invitations, Aguallo personally asked some business leaders to contribute. “If you can please confirm whether the Attucks [Asset Management] team will be attending and helping the Toigo Foundation through a potential scholarship,” Aguallo wrote one company, which was seeking a contract renewal from his agency.

Aguallo solicited $5,000 from LM Capital, an investment management firm whose contract was renewed by LACERS three months before the party. Five other $5,000 donors had business pending before the agency within six months of the party.

A sixth company, Thompson, Horstmann and Bryant, had business before LACERS’ investment committee two days before the party. The company gave $10,000.

After the party, Aguallo received accolades from a handful of investment professionals.

Chau Nguyen, whose firm, Progress Investment Management, does business with LACERS and sponsored a $5,000 table, praised the party and then invited Aguallo to a birthday celebration in West Hollywood for Smith, the LACERS board member.

“It is time,” Nguyen wrote, “for another party.”

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david.zahniser@latimes.com

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On latimes.com

Party planning

To read some of the e-mails about the lavish party, go to latimes.com/california.