The Swarm

Mix it up with The Bee's editorial board.

February 18, 2010
Artie Samish is smiling from wherever he might be

ARTIE SAMISH 1949.JPG

California lawmakers are preparing to wage battle with so-called placement agents, a rather secretive group that helps money managers win business from the California Public Employee Retirement System, and other pension funds.

As described in today's editorial, Assemblyman Ed Hernandez, a Democrat from Baldwin Park, is carrying a bill on behalf of CalPERS that would force placement agents to register as lobbyists, and comply with all the same laws.

Through their trade groups, the placement agents appear willing to accept most regulation, with one big exception--the way they get paid.

As it is, they collect pay based on their success. They like that system fine. One placement agent, former CalPERS board member Alfred Villalobos, has received $60 million in fees for his work helping money managers win CalPERS business, as The Bee's Dale Kasler wrote in this profile.

The Securities Industry and Financial Markets Association said in a statement that it is "opposed to the lobbyist prohibition on contingency fees.

"Securities sales are paid on a contingency fee basis, so a contingency fee prohibition amounts to a placement agent ban.  Such a ban would limit the state's ability to tap a diverse group of investment opportunities, including smaller minority and women-owned investment funds, and could keep state pension funds from investing in the best possible investment strategies for their plan participants--the people of California."

But for six decades, California has prohibited lobbyists from receiving pay based on whether they "succeed." It is one of 38 states that have such prohibitions, according to the National Conference of State Legislatures.

The prohibition dates back to 1949.

Back then, the legendary cigar-chomping lobbyist Artie Samish made the blunder of bragging to Collier's Weekly that he was the "governor of the legislature." He even posed for what became the cover phone with a ventriloquist's dummy, suggesting that he was pulling the strings. To prove him wrong, the legislature passed several reforms.

Back in 1974, UCLA law professor Daniel Lowenstein and Bob Stern, head of the Center for Governmental Studies, worked for then Secretary of State Jerry Brown who directed them to write what became the Political Reform Act.

"Jerry Brown hired me to write the best possible law," Stern said.

They began by looking at the existing law.

"There were provisions we were not going to change," Stern said, recalling that the ban on success-based fees dated back to the Samish-era reform and was not worth changing. "We didn't want to weaken existing law."

Placement agents will be working the Capitol halls to kill Hernandez's bill, or at least amend it so they can collect pay based on their success. Some will even hire lobbyists to do their bidding.

February 10, 2010
Check your wallet when governors say 'trust me'

Gov. Arnold Schwarzenegger regularly tells Californians to "trust me."

Schwarzenegger two years ago promised "hundreds of millions of dollars" for the state budget if only voters would support compacts authorizing massive expansion of four Indian-owned casinos in Southern Califrornia.

Writing in the state's official voter pamphlet, the governor vouched for the deals, saying the compacts he helped negotiate would provide "billions" over the years for police, fire and schools.

Tribes that benefited from the deals dumped $82 million into their winning campaign. Foes led by commercial gambling interests spent $50 million opposing the deals.

Voters approved the deals, as they have repeatedly done when Indian gambling goes before them.

Two years after the vote, we at The Swarm assume that we ought to be able to find out how many "hundreds of millions" have been delivered to California.

We thought it was a timely question now that the Morongo Band of Mission Indians is seeking the right to operate Internet poker with other gambling interests.

Schwarzenegger signed a compact with Morongo and the electorate to ratified that deal as part of the 2008 package.

But there's a rub. The Schwarzenegger-negotiated compacts exempt information that the tribes provide to the state from disclosure under the California Public Records Act. As a result, amounts individual tribes pay to the state is secret.

Ok. But isn't the public at least entitled to know what the overall amount is that the four tribes have paid to the state coffers? Voters were, after all, told in a very public way in California's official voter pamphlet that the deals would deliver "hundreds of millions."

Schwarzenegger's Department of Finance referred Swarm questions to the California Gambling Control Commission. The Gambling Control Commission, which is part of Schwarzenegger's administration, declined The Swarm's request for the information, citing secrecy provisions in the compacts negotiated by Schwarzenegger.

Schwarzenegger says "trust" him. Perhaps. We prefer another governor's suggestion: Trust but verify.

February 8, 2010
Schwarzenegger seeks to help more developers like Ed Roski

Gov. Arnold Schwarzenegger is hoping that his political relationship with billionaire Ed Roski Jr. bares offspring.

As we wrote on Sunday, the governor signed extraordinary legislation exempting Roski from lawsuits over California environmental law in his effort construct an 80,000-seat football stadium in the San Gabriel Valley town of City of Industry. The stadium would house the National Football League team Roski hopes to bring to the Los Angeles area.

Now as part of his push to help the economy, the governor is urging lawmakers to approve legislation that would authorize his administration and future governors to grant the same sorts of exemptions to 25 projects a year.

The governor contends that these would be projects where environmental impact reports already have been done.

But under this proposal, the governor's secretary of Business, Transportation & Housing would gain significant power to reward developers. The secretary could exempt 25 projects, ranging from roads to housing, from lawsuits questioning whether or not the developers had complied with the California Environmental Quality Act.

Schwarzenegger has not identified the projects. But his proposal gives the geographic spread: 10 in Los Angeles, San Diego, Orange and Riverside counties; five in Sacramento and other Central Valley counties; five in the Bay Area; and five to be determined.

Schwarzenegger portrays himself as the environment's best friend. But this idea amounts to an assault on the state's strongest environmental law, the California Environmental Quality Act.

Many developers are political players. This could be a great way for a governor to reward friends. But that wouldn't happen, at least not under this administration.

The concept raises all sorts of other questions. What happens if a developer doesn't make the list? Could that developer seek special legislation to be placed on the favored list? Could that developer sue to be added to the list.

In his drive to create jobs as his tenure ends, the governor might consider being direct. If there is a problem with "frivilous" lawsuits in which CEQA is cited, perhaps he should focus on that issue.



About The Swarm

The Swarm is written by members of The Sacramento Bee's editorial board. They meet daily and are separate from the newsroom. Views included here are those of individual writers, and do not necessarily reflect those of a majority of the board or the positions expressed in The Bee's editorials.

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