Hayward on CA Pension Scandal
Professor Allison Hayward is troubled by the possibility that third parties asked for donations from financial investment firms for union events on behalf of a labor leader seated on the boards of big public pension funds in California.
"You don't have to explain that they (investment firms) are going to be at a competitive disadvantage if they don't contribute," Hayward said. "The implication is, 'Nice business you have here. Shame if something were to happen to it."
Campaign finance records indicate that the United Food and Commercial Workers Union in California received nearly $1 million in donations from the financial industry while Sean Harrigan, its former executive director, served on the boards of large public pension funds. Harrigan currently is under investigation by the Securities and Exchange Commission, which is concerned with financial sector contributions to the union from firms having investments or other contracts with the pension funds.
With Labor Leader on California Pension Boards, Financial Firms Fattened Union Campaign Fund, ProPublica, June 13, 2009. By Sharona Coutts and Seth Hettena.
"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.'"