Claremont Insider: GIGO*

Monday, February 1, 2010



You may have seen the series of articles the Los Angeles Times wrote last year about the California Public Employees' Retirement System (CalPERS) and its use of highly compensated consultants called placement agents who help steer CalPERS to various investments.

The initial article in the Times on 11/3/09 focused on Alfred Villalobos, a former CalPERS boardmember. The Times piece reported that over a seven-year period, Villalobos earned over $53 million from private equity firms who hired Villalobos because of his ability to give them a friendly introduction to the decision makers at CalPERS.

The Times article laid out Villalobos' sterling qualifications for the business of public employee pension investments (think Peter Principal):

In 1993, newly elected Los Angeles Mayor Richard J. Riordan, a Republican, tapped Villalobos as his deputy mayor for economic development. Villalobos resigned five months later after a series of damaging disclosures in The Times.

The paper reported that Villalobos had declared personal bankruptcy in 1982, writing off $350,000 in debts instead of trying to work out a court-sanctioned repayment plan.

Seven years later, Villalobos bounced $30,000 in checks to pay a weekend's worth of gambling debts in Lake Tahoe, which he refused to pay until the casino sued him.

After leaving City Hall, Villalobos shifted his focus to Sacramento, where, a year earlier, Republican Gov. Pete Wilson had appointed him to the state Personnel Board. That panel, in turn, named Villalobos as its representative to the 13-member CalPERS board, where he served from 1993 to 1995.

The Times article raised the issue of that $53 million Villalobos earned from his investment firm clients. Remember, the cost of all those consultant fees get passed on to the customer - in this case CalPERS and all of its current and future pensioners, as well public agencies like our fair city.

The article also shined a spotlight on public officials at all levels of government who don't appear to be as concerned with the public good as they are with lining their pockets with taxpayers' money, and that's another cost that ultimately gets passed along to the citizens of California. People like Villalobos seem to seek public service merely as a stepping stone to a much larger payday once their time in whatever position they've been elected or appointed to is over.


Speaking of revolving doors, we wrote last weeks about Claremont's former city manager, Glenn Southard, and his announced retirement from his current job in Indio. Southard spun taking a "golden handshake" as a sacrifice he made in order to help Indio deal with the multi-million budget deficit that was Southard's gift to Indio.

A reader wrote in regarding a rather obvious point that we completely overlooked. The sort of golden handshake savings Indio is looking for come about because the people stepping down don't get replaced. Cities are willing to foot the expense of golden handshakes because it saves them money in the long run by reducing the number of workers. In fact, Claremont used this strategy to deal with its own budget deficit. However, Southard will be replaced by another city manager with his own six-digit salary.

And, of course, Southard also wants his own consulting gig, seeking to continue to work for Indio after he retires in order to help the city complete the projects he started. It maybe not as lucrative as the one Alfred Villalobos landed, but it's one that Southard will be sure to milk for as much as he can squeeze out of the poor fools on Indio's council, as well any other cities willing to contract Southard's services.

Here's our reader's note:
DATE: Saturday, January 30, 2010 12:26 PM
TO: Claremont Buzz

Perhaps you have already mentioned this in a previous posting, but Southard taking the golden handshake is totally inappropriate and will not save the city of Indio any money, as golden handshakes are supposed to do, as the city will be hiring another city manager to take his place. Golden handshakes are primarily given to move on senior employees and then NOT fill their jobs, therefore saving money. So, Glenn gets the gold, perhaps even more money by consulting back with the city, plus the retirement he will draw on top of that, and taxpayers in Claremont will foot the majority of that retirement bill as he worked here the longest. As I have always said “Glenn Southard, the gift that keeps on giving”, except what he gives people is usually the shaft.


The Indio-Claremont revolving door came full circle when Indio announced it was considering turning to former Claremont Finance Director Michael Busch to come in and help the city "right size" its government by determining what areas can be streamlined or even eliminated. You may remember that Busch followed Southard from Claremont to Indio.

The Desert Sun's Xocticl Pena had an article yesterday that explained exactly what Indio was hoping to accomplish:
Michael Busch, a former Indio finance director who also worked with City Manager Glenn Southard in Claremont as the treasurer and finance director, will be tasked with creating a “fiscal recovery plan” that could include everything from a forensic financial audit to identifying positions for layoffs. And his work could be shielded from public scrutiny, given the attorney/client privilege clause in the proposed contract

According to the article, Busch is now president of a company called Urban Futures, Inc., a company that appears to be composed almost entirely of former local government employees. Indio will pay Urban Futures and Busch $14,000 per month under the proposed contract, the Desert Sun said.

The Desert Sun has posted the proposed UF contract here. As the newspaper points out, if hired, Busch would work 20 hours per week. The monthly $14,000 would work out to $175 per hour - more than Southard himself was paid. Marvel at the irony in this. Busch helps Southard oversee an operation that ends up with a deficit that runs as high as $14 million, then gets hired on to help fix said problem. You wonder how many others at UF have called on their former employers for contract work.

With money like that flying around, it can't be long before Southard himself signs on with a firm like UF. You'd think that some of Southard's other flunkies would get into the act as well. Or maybe they already have:
(Click image to enlarge)

Should we be looking out for a future UF contract here in Claremont?

*Garbage in, garbage out, as programmers say.