Shahinian steps down from CalPERS post

Leon Shahinian, a senior investment officer embroiled in the California Public Employees’ Retirement System’s ongoing pay-to-play investigation, has stepped down, according to reports.

Joseph Dear, the chief investment officer, will take over Shahinian's duties until a replacement is found, CalPERS said in a statement.

Shahinian, who joined CalPERS in 1998 and has run the alternative investment programme at CalPERS since 2004, was swept up in the probe because of his alleged relationship with a placement agent who is being sued by California.

Leon Shahinian

Shahinian was placed on administrative leave in May after allegations he failed to disclose an allegedly lavish trip paid for by Alfred Villalobos, who runs placement firm ARVCO.

Villalobos, a former CalPERS board member, is being sued by California’s Attorney General for alleged fraudulent activities relating to his work soliciting commitments from the $209 billion pension.

Shahinian has not been accused of wrongdoing, though a trip to New York with Villalobos to meet Apollo Global Management founder Leon Black is described in detail in the attorney general's complaint.

The complaint states that Shahinian was “instructed to build a closer relationship with Villalobos” by then-CalPERS chief executive Federico Buenrostro, a close friend of Villalobos, who has also been named in the suit. At the time, Villalobos’ firm, ARVCO, was working for Apollo placing funds with CalPERS and trying to convince the pension to buy a stake in the firm.

During a recent deposition, Shahinian expressed concerns about Villalobos’ involvement with Apollo in seeking capital from CalPERS, according to court documents.

Shahinian, then CalPERS’ private equity chief, made a direct request in 2006 to Apollo head Leon Black that the firm bring investment opportunities straight to the pension, bypassing third parties.

Shahinian’s request allegedly fell on deaf ears, as placement agent Alfred Villalobos was hired shortly afterwards by Apollo to help raise another fund, Shahinian said during a 27 July deposition.

“Part of the reason why I told Leon Black that CalPERS wanted a direct relationship with Apollo was that I did not see a need for there to be a third party involved,” Shahinian said, according to a transcript of the deposition.

The deposition was taken as part of Villalobos’ bankruptcy filing in California.