WSJ: Justice Department probes pension pay-to-play

Federal investigators are looking into possible illegal payments made to influence investment decisions at US pensions, including to placement agents.

Justice Department investigators are looking into whether illegal payments were made to influence investment decisions at US public pensions, including the California Public Employees' Retirement System, the Wall Street Journal reported Friday.

The newspaper cited several anonymous source for the information. The presence of federal investigators would expand an already wide-ranging probe started by New York Attorney General Andrew Cuomo into pay-to-play practices at New York's $129 billion state pension.

Part of the Justice Department probe involves payments to placement agents, the WSJ reported. The US Securities and Exchange Commission has also been running an investigation into the practice in New York, and has also been looking into pensions in California, the WSJ reported.

Cuomo has already charged six people in the investigation, including Elliott Broidy, co-founder and former chairman of a Israel-based investment firm, Markstone Capital Group. CalPERS is an investor in Markstone, and has been reviewing its relationship with the firm.

CalPERS also is re-assessing its relationship with Apollo Management, to which it first committed capital in 1995. Apollo paid a placement agent, Alfred Villalobos, to secure more than $3 billion of commitments from CalPERS, even though the pension owns a stake in the Leon Black-led firm. Villalobos is a former members of the CalPERS' board.

CalPERS has undertaken a wide review of all its fund managers and the payments they made to placement agents since last spring.