New job sparks L.A. ethics probe

The Los Angeles City Ethics Commission is investigating whether laws were violated by a former city department head who took a job with a Los Angeles-based investment company less than three months after his agency acted to benefit the firm, according to sources familiar with the probe.

Although ethics officials declined to confirm or deny the inquiry, several sources say investigators have asked about Robert Aguallo Jr., who retired as general manager of the $11-billion Los Angeles City Employees’ Retirement System in May.

With Aguallo at the helm, the pension fund board voted on Feb. 12 to reaffirm a year-old decision to invest up to $10 million with Cardinal Americas, a company that invests in firms that build public works, even though that company had failed to meet certain requirements.

On April 30, Cardinal Americas announced it had hired Aguallo as managing partner.

The city ethics law bars department heads and other officials from negotiating future employment with any person or company that has a matter before his or her agency.

Over the past two months, employees at the pension fund, frequently known as LACERS, have been interviewed by Ethics Commission investigators about Aguallo’s handling of the Cardinal Americas agreement, according to three city workers, all of whom spoke on the condition that they not be identified for fear of retaliation.

Sally Choi, who replaced Aguallo as general manager, referred all questions to the Ethics Commission.

Aguallo declined to be interviewed.

But a spokesman for Cardinal Americas said Aguallo negotiated his new job in April, weeks after the seven-member pension board vote. Aguallo “was never directly involved” in his former agency’s handling of Cardinal Americas, leaving such matters to the Pension Consulting Alliance, which helps to identify companies worthy of investment, said Cardinal Americas spokesman Mark Vargas.

Vargas said Aguallo also left such decisions to the board’s three-member investment committee, two of whom were appointed by Mayor Antonio Villaraigosa.

“Robert has not been contacted by the Ethics Commission at all, so there’s really nothing to respond to there,” Vargas added.

With offices in Los Angeles and Chicago, Cardinal Americas invests in companies that build massive public works projects, such as roads, bridges, airports, ports and public schools. To hammer home that point, the company’s website features an image of the $232-million performing arts high school being built by the Los Angeles Unified School District in downtown Los Angeles.

The pension board first voted on Cardinal Americas in March 2007, tentatively agreeing to invest up to $10 million in the firm’s projects. The board cast that vote despite a caution from its investment committee that Cardinal Americas lacked experience in pursuing its investment strategy, records show.

Because of Cardinal Americas’ relative inexperience, the board agreed to provide the money only after the company showed it had raised $50 million from other investors.

For nearly a year, Cardinal Americas failed to do so. Then in February, the pension board provided a six-month extension to give the company more time to find the additional money.

With Aguallo sitting nearby, the retirement agency’s chief investment officer, Dan Gallagher, made the presentation on Cardinal Americas. Gallagher reported directly to Aguallo.

Gallagher and LACERS’ assistant general manager Tom Moutes said they did not know about Aguallo’s job plans until after Cardinal Americas announced his hiring.

“He never said anything to me,” Moutes said. “The press release is the first time I knew.”

Aguallo is not the first public official to come under scrutiny for taking a job with a city contractor.

Last year, the Ethics Commission fined a top official at the Port of Los Angeles $5,000 for recommending the award of a contract to a company that had interviewed her for a possible job.

Stacey Jones, the harbor department’s assistant general manager, secured a position with the engineering firm Moffat & Nichol in early 2007, just as she was recommending that Moffat & Nichol receive a $7-million contract. The contract was canceled on the advice of the city’s lawyers and Jones did not end up working for the company.

When Aguallo left the city’s pension agency, he praised Cardinal Americas -- and its investment strategy -- in a press release issued by the company about his new job.

“After surveying my options, I quickly realized that infrastructure development represents the best new market opportunity for future investment growth,” Aguallo said in the release.

Cardinal Americas’ board chairman is George Pla, an entrepreneur who runs Cordoba Corp., a Los Angeles-based firm that provides engineering, construction management and transportation planning services. Cordoba and Cardinal Americas share an office just north of Chinatown.

In an interview last month with the magazine Hispanic Business, Aguallo said he expected Cardinal Americas to raise $50 million by August and $150 million in 2009.

Aguallo also told the magazine that he thought that a high-speed rail network in California would be a prime investment target for the company.

--

david.zahniser@latimes.com