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Villaraigosa pension board appointee quits in SEC inquiry

Sean Harrigan, president of the Los Angeles Fire and Police Pensions board, says he has 'done nothing wrong.' A colleague, Elliott Broidy, is also under SEC scrutiny in the investigation.

May 08, 2009|David Zahniser

Two of Los Angeles Mayor Antonio Villaraigosa's appointees to a city pension board resigned Thursday, one month after receiving a letter from the Securities and Exchange Commission asking them to identify income they had received from companies doing business with their agency.

Sean Harrigan and Elliott Broidy, members of the Los Angeles Fire and Police Pensions board, were asked to provide information to the SEC, which is investigating allegations of kickbacks at a New York state pension fund.

Harrigan said he left because the inquiry had caused his agency's board meetings to become increasingly disruptive -- and created "a frenzy of media activity" that had placed him in "the eye of the storm."

"While I have done nothing wrong, I recognize that this entire matter has become a huge distraction for all parties involved in the business of operating an $11-billion public pension system," he said in a statement.

Villaraigosa spokesman Matt Szabo said the mayor and his two board members agreed the resignation was "the best course of action."

Harrigan and Broidy had served on a nine-member board that oversees a $10.7-billion portfolio on behalf of retired police officers and firefighters. Both men had been asked to disclose their communications with firms under scrutiny in the New York investigation.

Broidy, the chairman of Markstone Capital, said in a statement that he was cooperating with investigators and had never profited in any way from the pension fund. He was originally appointed by Mayor James K. Hahn and reappointed by Villaraigosa.

The two resignations come a week after a third pension board appointee, Kelly Candaele, was asked by the mayor to quit the Los Angeles City Employees' Retirement System board after he participated in a campaign fundraiser for the city attorney campaign of City Councilman Jack Weiss -- in violation of city law.

Candaele hosted the event with two key figures at Wetherly Capital, a Los Angeles firm also mentioned in the SEC letters. Wetherly, known as a placement agent, pitches investment opportunities to public pension boards.

The Ethics Commission also has not concluded its investigation of Robert Aguallo, the former head of the agency where Candaele had served as a board member. Aguallo took a job with an investment fund that had sought business with his agency.

Harrigan, 63, was selected by Villaraigosa in August 2005 to serve at the pension agency. Seven months later, he formed Sean Harrigan LLC, picking up such clients as Wetherly Capital.

Before Harrigan joined the board, Wetherly had secured investments from Fire and Police Pensions for at least eight funds, according to company officials. On June 1, 2006, less than a year into his tenure, Harrigan voted to invest $10 million apiece in two Wetherly clients -- Nogales Investment Fund II and Levine Leichtman Capital Partners.

Less than three months later, Harrigan became a paid consultant to Wetherly, serving in that role for five months. Harrigan said he advised the firm on pension matters outside California.

The city's ethics laws bar commissioners from negotiating their employment with companies that have matters pending before them. Harrigan said that was not an issue, however, because he took the work with Wetherly on Aug. 15, 2006, -- roughly 10 weeks after he voted on the firm's clients.

"When I took the vote on both of those funds, I was not in discussions [with Wetherly] on any type of a consulting agreement," he said in an interview with The Times this week.

Harrigan said he also waited one year before voting on any investment being represented by Wetherly at his agency, as is required by city law. In 2008, he voted to invest in at least two more Wetherly clients, allocating $25 million to Levine Leichtman and $30 million in Bond Cos., which develops and invests in projects in California and elsewhere.

In Los Angeles, mayoral appointees such as Harrigan are required to sign an ethics pledge promising to avoid "actual and perceived conflicts of interest at all times." Szabo, the mayoral spokesman, would not say whether Harrigan's consulting work violated the spirit of that pledge.

"The mayor holds all of his commissioners to extraordinarily high standards, which includes avoiding even the appearance of impropriety," he said.

Harrigan announced his resignation at Thursday's board meeting, not long after he and his colleagues voted to fire a consulting firm linked to the New York scandal. On a 7-0 vote, the pension board dismissed Dallas-based Aldus Equity, one of two firms that recommend private equity investments to the agency.

Aldus was charged by the SEC with civil securities fraud for allegedly making improper payments to win business at the New York fund. A founding partner of Aldus, Saul Meyer, was arrested and charged last week by New York Atty. Gen. Andrew Cuomo with one count of criminal fraud.

Lawyers for Aldus and Meyer have denied the charges. In a statement, Aldus said it had served the pension board with "the highest degree of professionalism, integrity and transparency."

Still, Fire and Police Pensions board member Sam Diannitto urged his colleagues to fire the firm, saying failure to do so would "give the image that this board condones 'pay to play.' "

"This board is tainted. It's tainted by this issue," he added.

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david.zahniser @latimes.com

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