State ‘lobbying’ bill stalls, placement ban looms

A California bill that would require placement agents to take flat fees for fundraising services failed to pass a committee Wednesday, prompting key state officials to threaten a push for a full ban on placement agents.

California’s state controller John Chiang brought up the spectre of a full ban on placement agents interacting with public pensions after a bill regulating the activities of placement agents in the state stalled in a legislative committee Wednesday.

“In the absence of meaningful legislative action, I will support prohibiting placement agents from doing business with [the California Public Employees’ Retirement System] and [the California State Teachers’ Retirement System],” Chiang said in a statement. State Treasurer Bill Lockyer has also said Wednesday he would propose a full ban on placement agents if the bill doesn’t pass.

The bill, AB 1743, failed in a vote in the State Assembly’s Appropriations Committee, but was authorised to be reconsidered for another vote next week. The bill has passed unanimously in two other Assembly committees.

If the bill fails in the committee again next week, then the measure is dead, according to the controller’s office. The bill would move on to the full Assembly floor for a vote if it passes next week. Upon approval of the full Assembly, the bill would go to the Senate for consideration.

“While legislators and voters had the wisdom to remove these tools from lobbyists decades ago, members of the Assembly Appropriations Committee refused to do the same with Wall Street-hired influence peddlers,” Chiang said in a statement.

CalPERS co-sponsored the bill that would treat placement agents as lobbyists, exposing them to stricter disclosure requirements, as well as ending payments for successful fundraisings. Placement agents under the proposed bill would instead be paid flat fees up front, as are lobbyists.

Agents and their firms also would be subject to periodic registration as well as quarterly reporting of activities. Also, gifts to individuals would be limited and campaign contributions would be prohibited.

The Blackstone Group, which has a placement agent affiliate, Park Hill, hired a lobbying firm California Strategies, to argue against the provision in the bill that would prevent placement agents from being paid success fees in fundraising efforts.

Blackstone supports the beefed up disclosure requirements for placement agents, and also supports ending political contributions made by placement agents to officials in charge of investment decisions at public pensions.

CalPERS sponsored the legislation in the wake of allegations that a former member of the pension’s board had been paid millions of dollars in fees to solicit commitments from the pension for Apollo Management and other firms. It is not clear why Apollo needed the assistance of the placement agent, Alfred Villalobos, despite being partially owned by CalPERS.

The $206 billion pension performed a massive review of placement agent fees paid by its managers, and also reviewed its relationship with Apollo. The Apollo review led to the firm agreeing to slash some of its fees in the structured products it manages for CalPERS.