From ProPublica: Financial firms gave to union while leader sat on CalPERS

Financial firms showered nearly $1 million in political cash on the United Food and Commercial Workers union in California while a top union leader sat on the boards of big public pension funds in the state, an analysis of campaign finance records shows.

Sean Harrigan, the union’s former executive director, is now under scrutiny from the Securities and Exchange Commission, which has charged several firms and individuals with making improper payments to win investments from pension funds in New York and New Mexico.

Harrigan, 62, stepped down from the board of the Los Angeles Fire and Police Pension system last month in response to the SEC inquiry into his dealings while at the fund. He was appointed to the LA fund in 2005 after serving as a trustee and board president at CalPERS from 1999 through late 2004.

His lawyer, Mark Byrne, said in a prepared statement that Harrigan is cooperating with the SEC inquiry and that, “as far as Mr.

Harrigan is aware, no one has been provided favorable treatment, or penalized, for giving or not giving” to the union.

Harrigan’s union, however, pulled about a third of the $3 million it raised from 2001 to 2006 from players in the financial industry. About $500,000 came from donors who had business dealings with CalPERS, then the nation’s biggest pension fund.

In a Sacramento Bee story published Sunday, Harrigan confirmed that he had solicited contributions for the union from “not more than two dozen” financial firms while at CalPERS, but he said it did not influence his decisions on investments. “The issue was totally lawful,’’ he told the Bee.

Harrigan also told the Bee that he and other UFCW officials had requested contributions from financial firms and companies that were seeking real estate, consulting and other professional services at CalPERS.

“There was never any retribution to people who chose not to participate, and there was no impact on strong relationships I had with people who chose not to participate,” Harrigan told the newspaper.

Other major unions in California received few, if any, campaign contributions from investment or money management companies, a review of donations shows.

Campaign contributions have figured in a wide-ranging investigation of pension fund kickbacks in New York, where Attorney General Andrew Cuomo issued an indictment naming several prominent investment firms that allegedly took part in a vast pay-to-play scheme.
Among them is Wetherly Capital Group, a Los Angeles firm that earns fees by introducing money managers to pension funds.

Wetherly paid Harrigan a consulting fee three years ago, disclosure filings show.

None of the financial companies contacted about the UFCW contributions would comment about their interest in backing workers who ring up groceries and stock supermarket shelves. Nor did union officials respond to repeated interview requests.

The unfolding pension scandal has cast a critical light on how closely systems like CalPERS police themselves and the firms they employ to manage their holdings. State and local government retirement systems in the U.S. hold an estimated $2.2 trillion in assets.

Now, the SEC is considering whether to ban financial firms from managing pension funds if they’ve made recent campaign contributions to trustees.

Critics say such contributions invite cronyism and undermine public trust in the system.

“I think it’s corruption,” said former California lawmaker Keith Richman, president of the nonprofit watchdog group California Foundation for Fiscal Responsibility. “It is not putting money in the individual’s pocket, but it is corruption of our political system.”
Firms Hit Up on Harrigan’s Behalf

As CalPERS board president from 2003 to December 2004, Harrigan was in a position to influence which investment firms won contracts to manage retirement money, according to present and former CalPERS officials.

Through his lawyer, Harrigan declined to say whether he personally requested donations from those firms for union events. But a document obtained by ProPublica states that “investment partners” had complained to CalPERS about solicitations for the union “on behalf of the Board President.”

CalPERS spokeswoman, Pat Macht, said the $183 billion fund doesn’t have a policy restricting political fundraising by board members from firms that have business with the system.

Allison Hayward, a campaign finance specialist at George Mason University School of Law, said reports that third parties asked for contributions on Harrigan’s behalf were troubling.

“You don’t have to explain that (investment firms) are going to be at a competitive disadvantage if they don’t contribute,” she said. “The implication is, ‘Nice business you have here. Shame if something were to happen to it.”

While on the CalPERS’ board, a volunteer job, Harrigan served as the UCFW’s executive director and international vice president and was paid about $195,000 annually, according to disclosure forms. By 2007, he had retired from both union positions.

Harrigan remains a member of the State Personnel Board, where he earns a salary of $40,670. Among other duties, the personnel board is responsible for filling one of the 13 CalPERS board positions.

Harrigan’s tenure at CalPERS overlapped with one of his union’s biggest election battles.

Proposition 75 on the 2005 ballot would have required member consent before unions could spend dues on political campaigns. The UFCW, squaring off against Gov. Arnold Schwarzenegger and corporate backers, spent nearly $1 million to defeat the measure.

Editor’s Note: In a Sacramento Bee story published Sunday, Harrigan confirmed that he had solicited contributions for the union from “not more than two dozen” financial firms while at CalPERS, but he said it did not influence his decisions on investments. “The issue was totally lawful,’’ he told the Bee.

Harrigan told the Bee that he and other UFCW officials had requested contributions from financial firms and companies that were seeking real estate, consulting and other professional services at CalPERS.

“There was never any retribution to people who chose not to participate, and there was no impact on strong relationships I had with people who chose not to participate,” Harrigan told the newspaper.

Researchers Kitty Bennett, Lisa Schwartz of ProPublica, and intern Olga Pierce of ProPublica contributed to this report. This story, posted June 13 on ProPublica’s web site, and other investigate reports can be viewed at www.propublica.org.