Angelides a Favorite of Pension Fund Interests

Over the years, state Treasurer Phil Angelides has taken $725,000 from the Silicon Valley glitterati who gathered to fete him at John and Rebecca Colligan’s Bay Area home one evening last month -- and he has delivered for them.

The Democratic candidate for governor is a self-styled crusader against corporate excess. But since taking office in 1999, he also has collected $4.5 million in campaign donations from money managers and others seeking to do business with the state’s two major public pension systems, an analysis of his campaign records shows.

One sponsor of the April 4 fundraiser enlisted Angelides to help kill a far-reaching plan that the staff of one pension system had drafted to curb corporate accounting trickery. The treasurer has aided others by casting votes that helped direct pension business to them.

Angelides, like his Democratic gubernatorial rival, state Controller Steve Westly, sits on the boards of the California Public Employees Retirement System, or CalPERS, and the California State Teachers Retirement System, or CalSTRS, respectively the largest and third-largest pension funds in the nation.

And like his rival, Angelides has taken donations within days or weeks of those boards’ decisions to place money in funds managed by his contributors.

A fund that venture capitalist John “Bud” Colligan helped establish received a $10-million commitment from CalPERS in May 2001. That fund, now called Pacific Community Ventures, was one of 11 that received money out of 67 that applied. The day after Angelides voted for that investment, he received his first donation from Colligan: $500, according to campaign finance reports.

Angelides interceded with CalPERS on Colligan’s behalf in September 2003, giving one of the retirement system’s staffers a lengthy letter in which Colligan outlined ideas about using investments to improve low-income areas. Angelides sent the staffer a handwritten note saying: “I look forward to your thoughts and having you join Bud Colligan ... and my staff to discuss this letter/ideas.”

Angelides’ desk calendar shows he had two meetings in October 2003 related to Colligan’s fund, including one in Sacramento with Colligan and the CalPERS staffer. Colligan, who did not return phone calls from The Times, gave Angelides a $5,000 donation in December 2003.

Altogether, Colligan, his wife and business associates have donated $54,000 to Angelides. In March of this year, a month before the Colligans held the Angelides fundraiser, CalPERS selected Pacific Community Ventures as an investment advisor.

Another sponsor of the April fundraiser was John Shoch, whose Alloy Ventures received $10 million from CalPERS in 2000 and $10 million more in 2002. Shoch and others affiliated with the venture capital company have given Angelides $38,800.

A third sponsor was John Freidenrich, who with his family has donated $160,400 to Angelides. Freidenrich had been a partner at Bay Partners, a venture capital fund that received $20 million from CalPERS in 2001.

“I like what [Angelides] stands for and how he handles himself,” Freidenrich said, adding that he currently has no business with the pension funds.

Angelides has tapped other big-name venture capitalists doing pension fund business. Yucaipa Cos., an investment fund founded by Los Angeles-area billionaire Ron Burkle, received $450 million from CalPERS in 2001 and 2002 with the treasurer’s support and $150 million in 2003 from the teachers’ retirement system.

Burkle and others in Yucaipa Cos. donated $103,720 to Angelides between 1999 and 2001, and they held a fundraiser for him in December 2001 that yielded several thousand more.

Westly has taken $17,392 from Yucaipa since the 2002 campaign that made him state controller and $1.86 million overall from donors seeking or holding pension fund business since he took office in 2003.

Money managers covet business from CalPERS, which manages $200 billion in retirement savings for government workers, and CalSTRS, which oversees $130 billion for public school teachers. In addition to profiting from the investments, the money managers collect fees from the funds.

CalPERS paid Yucaipa Cos., for example, $16.3 million in fees in 2003 and 2004, the most recent years for which records are available.

CalPERS spokeswoman Pat Macht said returns on the Yucaipa investment have been impressive.

Angelides has received campaign donations from other pension board contractors, including law firms. CalPERS, for example, retained San Diego lawyer William Lerach, a major Angelides donor, and what was then his law firm to represent it in two major lawsuits.

Last October, Lerach and his new firm settled one suit that obtained $651 million for pension funds nationally, including $200 million for CalPERS. Lerach’s firm was paid $94.9 million. The other suit is pending.

Lerach and his current and former partners have contributed more than $207,000 to Angelides, and Lerach held a fundraiser at his La Jolla home this month that raised several thousand dollars for the treasurer.

Lerach and his current and former partners have also given $92,000 to Westly.

A federal grand jury in Los Angeles this month indicted Lerach’s former firm, Milberg Weiss Bershad & Schulman, and two of his former partners in an alleged kickback scheme, prompting Westly’s campaign to announce it would return the donations. Westly called on Angelides to do the same. Angelides said he had no plans to do so.

Angelides declined interview requests. But at a recent campaign stop, he said he doesn’t intervene on behalf of money managers seeking pension fund investments, leaving such matters to the staff.

“They’re the ones entrusted to vet deals,” Angelides said. “And when people come to us, we refer them to CalPERS staff.”

Business ethics experts long have warned guardians of pension funds against soliciting campaign cash from companies seeking access to the billions of dollars they control.

“The issue is whether those [board members] are acting in the best interest of pensioners or are acting on behalf of political constituents,” Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, said in an interview.

Levitt said the flow of campaign cash to board members appeared to play a role in their 2002 rejection of corporate reforms that could have required companies to more accurately report their profits.

Angelides crusaded against those accounting changes and was lauded for that last year when 22 Silicon Valley business executives endorsed his candidacy, writing in a statement that he “led the fight” to stop the “detrimental proposals.”

At issue was how companies would have to report stock options given to executives and other employees. CalPERS staff said that allowing companies not to reflect that expense in their bottom line made profits appear artificially rosy. Alan Greenspan, then Federal Reserve chairman, and billionaire investor Warren Buffet were among those advocating that the federal government adopt new rules requiring more transparency.

CalPERS staff urged the board to endorse such a rule change. The size of California’s pension system and its clout in the marketplace give it tremendous influence over how such national corporate governance issues are settled.

One of Angelides’ biggest donors, Silicon Valley venture capitalist L. John Doerr, was organizing the opposition. Doerr, his family members and others in his venture capital firm Kleiner, Perkins, Caufield & Byers have contributed $252,000 to Angelides since 2001. Doerr was a sponsor of the fundraiser at Colligan’s home last month.

When the proposal to endorse the rule change went before the board in 2002, Angelides took a leading role in helping Doerr and his political advocacy group, TechNet, dispose of it.

Saying an overreaction to “bad actors” would damage solid corporations, the treasurer argued at length against the proposal at two board meetings. The board went along with him, and the effort faltered at the federal level soon after.

“I have to believe that political considerations were part of that decision,” said Levitt, who had come to Sacramento to testify in favor of the proposal. “I was quite disappointed that, in the face of what appeared to be the broadest support from the CalPERS staff, the board did not support the recommendation.”

Angelides spokesman Dan Newman said the treasurer is “proud he spoke out,” and believes that awarding stock options to employees “gives workers a stake in the long-term success of their companies.”